Accenture (ACN) Set to Buy Digital Commerce Company Altima

In an effort to expand its agency business, global consulting giant Accenture Plc ACN recently announced entering into exclusive negations to buy Altima — a digital commerce agency specialized in customer experience design. The deal is subject to customary closing conditions and needs ‘prior consultation with the relevant works councils’. As usual, Accenture has kept financial details of the transaction under wraps.

Headquartered in France and founded in 1997, Altima helps its clients transform their businesses through its expertise in designing e-commerce, and providing mobile and in-store customer experiences, and related strategies. Approximately 370 people are currently working at its offices in France, China, Canada and the United States.

Once the transaction materializes, Altima will join the Accenture Interactive platform, 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 key point behind this transaction is that with this acquisition, Accenture will be able to better help its Interactive clients in expanding their businesses in France, China, Canada and the United States. The integration of Altima’s expertise will enhance Accenture’s Interactive capabilities and help it provide end-to-end digital marketing services, which will bring a deeper and broader set of digital solutions to its clients.

Accenture has outperformed the S&P 500 in the year-to-date period. The stock has returned 18.4% in the said period, while the index returned 14.2%.

Since the formation of Accenture Interactive, the company has made significant acquisitions to enhance its digital marketing capabilities. Altima will be its 18th buyout in the last five years.

We believe the company’s strategy of enhancing Accenture’s Interactive capabilities bodes well for future growth which can be better justified with Gartner Inc.’s IT data on digital marketing spending.

According to the U.S. IT research firm, companies have spent nearly 12% of revenues for marketing in 2016, of which spending on web, digital commerce and digital advertising were the top three categories of marketing. The report also suggests that 65% of the companies are planning to increase their 2017 digital marketing spending.

Considering the growing need for digital marketing, we anticipate Accenture’s investment in digital marketing capabilities to be conducive to 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.

Currently, Accenture holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another top-ranked stock in the broader technology sector is Micron Technology Inc. MU, which has an expected long-term EPS growth rate of 10%.

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