How we use acquisitions to capture significant value for Accenture
August 3, 2021
Earlier this year, Accenture was described as the “world’s most acquisitive firm” in a Bloomberg article highlighting our acquisition activity. It was great to be recognized by such an esteemed news source, but the reality is this was no flash in the pan.
It has been a long campaign over the past decade to build our M&A engine, with a lot of blood, sweat and tears along the way (well, actually, no blood just to be clear!). In our early years, we did maybe three or four acquisitions a year. That number reached 34 deals in fiscal 2020, with a total investment of $1.5B, and will even surpass that number in fiscal 2021 for an expected investment of about $4B.
How did we make such a leap? Looking back with the luxury of 20/20 hindsight, I can point to six aspects that have contributed to our success:
1. Partner with the business.
We shifted the focus of Corporate Development from being a top-down organization—driving and dictating deals that needed to be done—to one that is truly partnering with the business to identify their needs, engage with them to understand the kind of targets that they’re interested in, and then exploring those in an organized, systematic way. We also have focused, proactive outreach programs, including leveraging our amazing Accenture managing director footprint at clients in markets across the globe, and through strong relationships with key players in the M&A ecosystem, like banking advisory firms, to find targets in highly strategic areas.
The value is in finding the right company in the right space for Accenture and then integrating it. I firmly believe that clarity of purpose helps. As our CEO Julie Sweet put it herself in our last earnings call, "We invest in acquisitions to scale in areas where we see a big market opportunity, to add skills and new capabilities, and to further deepen our industry and functional expertise—all to drive continued innovation and the next waves of growth.” Even that simple message helps us quickly sort between the targets we might be interested in and those we won’t be.
2. Recognize it’s an end-to-end process.
When people think about M&A, it tends to be what they read in the news—one company launching an offer for another company, a bunch of back and forth negotiations and then buying it. But that’s only the transaction piece that happens in the middle of the process. While it’s really hard work, it doesn’t create value in of itself.
There’s also the front end: clearly defining our needs and then finding the right companies to meet those needs and then building relationships with them to persuade them to entertain a deal with us. Then, there’s the back end: integrating the company properly, in a way that maintains its own business momentum, culture and capabilities but also leverages the bigger Accenture to drive synergistic growth. So, the entire process is critical to success.
3. Industrialize the M&A process.
As you would expect, we have formalized our M&A framework end to end. We have very clear criteria about the stages that a deal goes through a pipeline. We have a highly secure digital cloud-based pipeline and workflow management tool. And we have investment committees that are experienced in evaluating whether an acquisition opportunity is the right opportunity for us to pursue.
Smaller deals are vetted by our Market Investment Committees, one for each market, and the larger ones by the Corporate Investment Committee, and the largest of all also have a robust Board approval process to manage through as well.
And lastly, we carefully monitor and measure the performance of every acquisition, for a minimum of three years, sometimes longer, with frequent regular visits to the appropriate committee. This helps keep focus on the investment but also provides a virtuous feedback loop.
4. Make post-merger integration a great experience.
Whilst I think most people view deal making as the cool part, I'd say that the hard work and the ultimate driver of success of an acquisition is very thoughtful, methodical, post-merger integration activity. At the end of the day, it’s about people and relationships. If people don’t enjoy where they’ve come to their new home in Accenture, then they’re going to ultimately vote with their feet and walk out of the door.
Given this, we have obsessed in making the post-merger integration activity a great experience for all of the acquired leaders and employees. This is where our HR colleagues in particular have really made a difference, we have a world-class approach to the cultural aspects of integration.
5. Build a highly capable, world-class team.
What makes our Corporate Development capability distinctive today is the combination of the collective knowledge of our people and the collaboration with many other Accenture functional teams, HR, Legal, Procurement, IT/IS, Finance and so on, that we’ve honed over many years.
Also, our Corporate Development team greatly emphasizes collaboration, knowledge sharing and networking to continuously improve on the way we do things. Most of our people in Corporate Development spent the early part of their careers working on the client deal side, so they have a very client-centric approach. Their frame of reference is in the end about how can we ensure this deal will bring more value to our clients. Inorganic investments are always done to enable and drive organic growth, if you like, not just doing inorganic for the sake of it.
6. Build a reputation of being a good acquirer.
We have found that many companies we target are interested in becoming a part of Accenture. Accenture has built a reputation among small businesses and their advisers as being a good acquirer. We value their passion for doing great work for their clients and for having interesting work for their people. They value our brand, our channel, our “culture of cultures,” and our ability to be good stewards for their people and for their clients. We find that even those companies that are not for sale yet are intrigued to engage with us.
A further major advantage of a strong M&A framework I mentioned earlier 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).
The view ahead
I’m pleased with how successive generations of Accenture leadership have entrusted Corporate Development to play such a pivotal role in Accenture becoming the world’s most acquisitive firm. And, of course, this is only the beginning. We continue to evolve, learn and grow…and we will do bigger bolder and more challenging things in the future—you can be sure of that!
To learn more about Accenture’s acquisitions process, read our case study.
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