Rapid changes in technology and our industry drove a need to swiftly rotate Accenture to new, digital offerings. One of the strategic levers we used to make that pivot was mergers and acquisitions (M&A).
Over the last decade, Accenture has evolved from making three or four acquisitions a year to the 34 deals we closed in fiscal 2020. On our journey to becoming a successful serial acquirer, we have moved from being a small corporate development group with the competence to execute deals to a state where M&A knowledge is institutionalized across a broad swathe of Accenture business leadership. This is the state of maturity an organization needs to reach to become a strategic serial acquirer.
We reached this state by industrializing our approach end to end. We became very focused on proactively identifying the right acquisition targets to further our corporate strategic priorities. Equally, if not more important, to ultimately enable value creation, we developed a comprehensive capability for properly integrating companies and maintaining post-integration momentum.
Accenture’s Corporate Development team’s mergers and acquisitions (M&A) capabilities have gone through several evolutions in the last 20 years. What makes our M&A capability distinctive today is the combination of the collective knowledge of our people and the collaboration with many other Accenture functional teams honed over many years. We now have formalized M&A processes, including the way of working with Accenture leadership to define today’s wave of strategic priorities.
Strategic priorities We have a focused strategy with clearly defined priorities and criteria for how we evaluate target companies. Accenture’s M&A activity is focused in three areas: 1) to rapidly scale in hot areas in the market, 2) to deepen industry and functional expertise, and 3) to acquire new capabilities.
We have found that many companies we target are interested in becoming a part of Accenture and being part of our journey to deliver on the promise of technology and human ingenuity. Accenture has built a reputation among small businesses and their advisers as being a good acquirer. They value our brand, our channel, our “culture of cultures,” and our ability to be good stewards for their people and for their clients. These qualities have worked to our advantage.
M&A framework We formalized our M&A framework end to end. Our M&A framework is robust and underpinned by clear courses of action that enable coordination and collaboration across the four phases of the M&A life cycle—origination, transacting, integration and delivery. It is supported by accountability from senior leadership with overall governance at the C suite. In addition, it is not only Finance, but other disciplines that engage with an acquired company to ensure full integration into Accenture. Our M&A framework is focused, dynamic and refreshed as needed.
A major advantage of a strong M&A framework is that today Accenture is very disciplined about putting an offer on the table to target companies. We stand out in our speed and certainty to close, qualities that are attractive to sellers, founders and management. As a result, Accenture has a very high close rate when we have an agreed, exclusive letter of intent (LOI). Additionally, of all the acquisition deals Accenture does, the vast majority are self-originated and stay exclusive—a distinguishing quality for Accenture in the market.
Accenture has built a reputation among small businesses and their advisers as being a good acquirer. They value our brand, our channel, our “culture of cultures,” and our ability to be good stewards for their people and for their clients.
Integration of acquired companies Accenture obsesses about integration. Why? Because it is fundamental to realizing value in any acquisition. Acquisitions of services companies are about people, clients and relationships, and so integration is a critical stage of the journey. Accenture has a deeply skilled, strong post-merger integration team dedicated to the assimilation of acquired companies into Accenture and a thorough operation.
The goal is always to fully integrate a company while preserving its unique characteristics that led Accenture to acquire it in the first place. We also place a priority on respecting the acquired culture enabled by Accenture’s “culture of cultures” philosophy. At the heart of our approach is the focus on making the journey of the acquired workforce into Accenture as positive an experience as possible to successfully retain and attract talent.
Maintaining post-integration momentum Maintaining post-integration momentum is also essential. Accenture excels at this stage by continuing to focus on the acquired business beyond the integration phase into ongoing operations. There are many key aspects including making business sponsors accountable for business case realization and conducting formal status reporting to Accenture’s Investment Committee every six months for three years. This is a forum for assessing performance against the original strategic rationale and the business case with an emphasis on forward-looking interventions. To monitor overall status of the acquisition portfolio over time, we use a performance dashboard.
Continuous improvement Our Corporate Development team greatly emphasizes collaboration, knowledge sharing and networking to continuously improve on the way we do things around execution and integration. To capture these insights, we deploy a portfolio of methods, tools and technologies to share best practices and lessons learned across the organization. We manage the origination process using a digital, cloud-based pipeline and workflow management tool, which enables us to work with “one version of the truth.” A web portal houses our collaboration tools, helping us to collaborate seamlessly.
A valuable difference
Today, Accenture is a leader in using mergers and acquisitions as a mechanism to drive future organic growth through relatively small acquisitions in new and emerging strategic priorities—essentially organic growth through inorganic acquisitions each year. As part of Accenture’s capital allocation strategy, the company targets to spend 25% of free cash flow each year on acquisitions.
However, Accenture takes the view that acquisitions are not a strategy in and of themselves. Rather, our Corporate Development team works with our business teams to help realize an independently developed business strategy, one tool of which to help achieve that strategy is acquisitions.
This was the approach Accenture took with developing Accenture Interactive. More than a decade ago, a nascent Accenture marketing services group was trying to develop an entity to provide digital marketing services to corporations, a new way of marketing. They had an evolving strategic vision and our Corporate Development team worked with them to help to fill the gaps. We pursued a large number of marketing and advertising acquisitions over time.
This process included the acquisition of Droga5 in May 2019, one of the most innovative and influential creative agencies. The acquisition added more than 500 employees to Accenture Interactive boosting its capabilities as an experience agency. The succession of acquisitions coupled with organic growth and leveraging other capabilities within Accenture led to the creation of one of the largest digital agency networks in the world today.
Accenture has a world-class corporate development team that has pivoted Accenture to the realm of new technologies and driven significant growth. A demonstration of these accomplishments is an annual investment of on average, over $1 billion in acquisitions over the past eight years. Accenture’s M&A journey will not stop here. The needs of Accenture clients continue to evolve and Accenture’s acquisition priorities continue to evolve with it and at an ambitious pace.
Accenture has a world-class corporate development team that has pivoted Accenture to the realm of new technologies and driven significant growth.