European IT services acquisition
What we've often noted on this site is the way in which business services (law, accounting, shipping, advertising, personnel) keep consolidating in order to serve their increasingly multinational customers across borders. This trend is growing in Europe, where national borders mean less and less from an economic point of view.
One such area is IT services, a task that companies are finding it easier to outsource to competent multinational service providers that can coordinate teams working in different languages and business customs.
The European IT services industry is led by IBM, with a number of smaller companies scrambling for market share. One of those, the UK's LogicaCMG made a move in that direction by announcing the acquisition of Unilog SA, a French information services company with a strong presence in Germany. The sales price is $1.1 billion.
Meanwhile, according to Wall Street Journal article ("LogicaCMG to Buy Unilog for $1.14 Billion", 9/19/05), that trend is growing in Europe:
Logica rivals Atos Origin SA and Capgemini SA said earlier this month that they would seek acquisitions beginning next year. And Siemens AG said Thursday that it would present an overhaul plan for its underperforming business-services division this week - a development that many analysts believe will lead to a partial sale of the business. These consolidation signs come as companies have shown increased demand for outsourcing, consulting and IT services on the Continent, giving impetus to the sector's recovery.
Logica CMG itself is the result of a 2002 between Logica and CMG. The expanded company will still not be one of the top three or four IT service companies in Europe, though it is getting closer. It is reported to be looking at other acquisitions. If nothing else, the deal may help make it a more desirable for an even larger company. As one analyst noted in a Computer Weekly article about the 2002 merger, "In today's market, IT services companies must be either big or niche to survive." That's even more true today.
