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Accenture to Buy Stake in Digital Agency SinnerSchrader AG

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Global IT services provider, Accenture plcACN recently announced that it has entered into an agreement to acquire a majority stake in SinnerSchrader AG, one of the leading digital agencies in Germany. The move is part of Accenture's efforts to enhance its digital marketing capabilities in Germany.

Per the agreement, Accenture has agreed to buy 62% of equity stake in SinnerSchrader from co-founder and CEO Matthias Schrader, CFO Thomas Dyckhoff, and other shareholders at €9.00 per share. Apart from this, the company intends to make a public tender offer to acquire all the remaining shares at same price.

Starting its journey way back in 1996, SinnerSchrader has now become one of Europe's leading digital agencies, which mainly focuses on the design and development of digital products and services. The agency, which went public in 1999, has about 500 employees who work across its offices in Hamburg, Berlin, Frankfurt, Munich, Prague and Hanover. Its leading clients include Allianz, Audi, BMW, comdirect bank, ERGO, Telefonica, TUI, Unitymedia and VW.

The company had generated revenues of €47 million in 2016. Also, the advertising news website Horizont ranked it the sixth biggest digital agency in Germany last year.

SinnerSchrader will join the Accenture Interactive platform, a part of the company's digital marketing-services arm, Accenture Digital. Accenture Interactive was formed in 2009 to deliver superior consulting, technology and analytics services to chief marketing officers (CMOs).

The integration of SinnerSchrader's expertise and global reach will help Accenture in enhancing its Interactive capabilities "in customer experience design as well as development of digital strategies and mobile offerings, and deepen its eCommerce and content marketing offerings."

Enhancing Digital Capabilities

Since the formation of Accenture Interactive, the company has made significant acquisitions to enhance its digital marketing capabilities, including the acquisition of Reactive Media, an Australian digital services provider and Brightstep, a Swedish digital content and commerce solution provider.

In November last year, Accenture acquired privately held U.K.-based creative advertisement agency, Karmarama, a full-service digital agency. In Apr 2017, Accenture acquired a majority stake in IMJ Corporation. Prior to that, Accenture acquired AD.Dialeto, Pacific Link and Chaotic Moon. These acquisitions are part of the company's efforts to bolster its digital marketing capabilities globally.

In our opinion, the acquisition of SinnerSchrader will further help Accenture to provide end-to-end digital marketing services, which will bring a deeper and broader set of digital solutions to its clients. Notably, SinnerSchrader will be Accenture's tenth acquisition globally since 2013 under its Interactive platform.

Considering the growing need for digital marketing, we expect Accenture's investment in digital and marketing capabilities to boost long-term growth. It will also help the company in effectively competing with other digital marketing service providers such as International Business Machines Corp. IBM , Dell and Deloitte.

Acquisitions - A Key Growth Strategy

Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. Last year, the company completed or signed about 12 acquisition deals across various business segments, including IT security, CRM capabilities and strategy consulting. In 2015, it had closed 21 takeovers.

These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, and maintain its leading position. A strong cash balance of $4.08 billion and an operating cash flow of $1.08 billion at the end of first-quarter fiscal 2017 are expected to support Accenture's inorganic growth strategy.

Bottom Line

Accenture's long-term prospects look promising due to its sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.

Notably, shares of Accenture have been trading in line with the Zacks categorized Consulting industry over the past one year. The industry gained 20.3% almost matching the stock's return of 20.8%.

The stock currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks worth considering in the consulting industry are Exponent Inc. EXPO and CRA International Inc. CRAI , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Exponent has witnessed upward estimate revisions for 2017 and 2018 in the last 30 days and has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters with an average positive surprise of 9.35%.

Estimates for CRA International have also moved up in the last 7 days. It has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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