Consulting, technology and outsourcing company
Cognizant Technology Solutions
) recently announced back to back acquisitions. The company
acquired a French financial services consulting company, Equinox
to enhance its consulting services, followed by the acquisition
of a unit of ValueSource NV.
Founded in 2004, Equinox provides service to investment
banking, retail banking, insurance and asset management.
Equinox's expertise in regulatory consulting that spans Basel
III, Solvency II, EMIR/Dodd-Frank, FATCA and MiFID will boost
Cognizant's consulting portfolio. Moreover, Equinox's strength in
strategy consulting, organization and operations management,
change management, and HR consulting will also improve the
company's competitive position going forward.
Lately, Cognizant has been scouting for companies with deep
consulting experience.We believe that the acquisition of Equinox
will fulfill that requirement. Cognizant management expects
approximately $40 million of annualized revenues from this
acquisition. Post acquisition, around 160 consulting
professionals from Equinox will join Cognizant.
Meanwhile, Cognizant also announced that it will acquire a
subsidiary of Belgium-based integrated bank insurance group
ValueSource NV as part of a five-year contract with the
Acquisitions have been a key growth catalyst for Cognizant
over the years. The company has made seven acquisitions since
2010, which includes three consulting firms.
In the past few years, Cognizant outpaced its Tier-1 peers
such as TCS
, Infosys Technologies
) on the back of its exposure to fast-growing verticals, like
Financial Services and Healthcare.
A key strategy of Cognizant is to align its business with
vertical industries, such as financial services, healthcare &
life sciences, retail, manufacturing and logistics. The company
has gained deep industry expertise and knowledge of the domain by
acquiring and partnering some leading companies across the
This is a good strategy for the firm to grow over the long
run. Additionally, we believe that Cognizant, which competes with
the likes of
) and Wipro, remains well diversified in key verticals and
emerging markets of social, mobile, analytics, consulting and
cloud, which will continue to boost its top line.
However, the increasing cost of acquisition will take some
time to recover. Moreover, increasing headcount may hurt
profitability in the near-term. Additionally, the uncertainty
surrounding the new immigration reform bill is expected to remain
a major overhang on Cognizant going forward.
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Currently, Cognizant has a Zacks Rank #3 (Hold).