**Editor’s Note: Please click
for a recap of the biggest channel-impacting mergers in Q4 2013.**
Deal-making in technology is back in a big way. But its not just Comcast or Facebook that are making bold, calculated moves. In the IT services and integration space, plenty of others are moving ahead with strategic deals that will bolster their capabilities and expand their market reach.
This month, Perficient announced its acquisition of ForwardThink Group, a $30 million technology consulting firm focused on the financial services industry. The deal provides Perficient, an information technology consulting firm serving enterprise customers throughout North America, with more than 100 trained technicians and proven skills in business process improvement, payments, finance transformation and risk management.
Based in St. Louis, Perficient is a Microsoft National Systems Integrator and Gold Certified Partner, an Oracle Platinum Partner, a Gold Salesforce.com Cloud Alliance Partner, a TeamTIBCO partner and an EMC Select Services Team Partner. With offices throughout the U.S., Europe, India and China, the deal with ForwardThink will provide Perficient a bigger footprint in New York. The company, which is on track to reach $430 million in sales this year, expects the deal with ForwardThink to be accretive to adjusted earnings per share immediately.
Also this month, Sapients Government Services division announced its acquisition of OnPoint Consulting, which provides technology and management consulting services to the U.S. federal government. The addition of OnPoint is also expected to enhance Sapients footprint in nonprofits and non-governmental organizations (NGOs). Founded in 1994 and with headquarters in Arlington, Va., OnPoint brings to Sapient 150 full-time employees.
In January, meanwhile, two providers of customer management services, Convergys Corp. and Stream Global Services, announced that they had reached a definitive merger agreement under which Convergys will acquire Stream for a $820 million in cash. When the deal is complete, the combined entity is expected to generate sales of $3 billion annually. According to martinwolf, a merger and acquisitions advisory services company based in Walnut Creek, Calif., this deal is the latest in a series of major consolidations in the business process outsourcing (BPO) space, following Accenture’s October acquisition of Procurian for $375 million and Synnexs September acquisition of IBM’s BPO Services business for $505 million.
Separately, theres also been an uptick in deals in the Microsoft applications market. In January, for example, InterDyn BMI acquired Commerce Systems Group while Hitachi Solutions acquired Ideaca.
Why so many deals of late? There are several reasons. For starters, the industry is undergoing a major transition away from traditional data center and client-server computing and toward mobile and cloud technologies. As a result, a great number of IT technology solutions and services companies find themselves lacking expertise in high-growth areas. Rather than take the time to develop it organically, many are finding it easier to acquire the expertise they need to hold onto customers and develop new, high-growth technology practices.
In addition, many longtime solution providers are looking to cash out after years in the business while business activity is high. Although valuations are nowhere where they once were, many solution providers no longer face the prospect of selling their businesses for a fraction of their annual revenue. While rising acquisition costs have put some would-be buyers off, many experts expect deal making to continue.
When BDO USA polled nearly 100 CFOs of U.S. tech companies for its 2014 Technology Outlook Survey, 43 percent said they expected M&A activity to increase over 2013.