Tuck-In Acquisitions Continue Despite the Stock Markets Melt-Down

/ March 11, 2020/ Accenture, Automotive, DXC Tech, Germany, Infrastructures, Luxoft, M&As (small under $50m in revenues), Nuclear, Semcon, Sweco, Sweden, UK

Despite the stock market melt-down, ER&D vendors have continued to make tuck-in acquisitions in the past two weeks. The acquired firms were of small size and not likely to impact the net debt of their new owners. However, should the Covid-19-China-US trade-war-Stock Markets meltdown-oil price crisis degenerate into a recession, we expect suck tuck-in acquisitions to become scarce.

Accenture Continues to Scale Up Industry X.0

Accenture continues to scale up its Industry X.0 unit, with the acquisition of Munich-based ESR Labs. ESR is an embedded systems specialist servicing the automotive industry and has a headcount of 130.

The M&A strategy of Accenture Industry X.0 is getting more explicit with a focus mostly on physical and digital product design and embedded software. Currently, Accenture has made much fewer acquisitions in the digital manufacturing space. See a recap of Accenture Industry X.0 acquisitions in the ER&D space.

DXC/Luxoft Acquires an ADAS Specialist in Germany

Still, in the German automotive market, DXC Technology’s Luxoft is to acquire CMORE Automotive, a Lindau-headquartered firm. CMORE also provides ADAS prototyping and system testing across four facilities. The company has a headcount of 250 and also co-owns a JV, EC-Mobility, in India with 500 employees.

Jacobs Completes its John Wood Transaction

Jacobs, the former Jacobs Engineering, finalized the acquisition for $325m of the nuclear engineering business of UK-based firm John Wood plc. Wood’s nuclear engineering business is sizeable with USD 285m in 2019 revenues, an adjusted EBITDA margin of 10% margin, and a headcount of 2,000. It also brings a nuclear research, development, and testing facility in Warrington, in the northwest of England.

We still think this is a missed opportunity for Assystem, which had the chance of almost doubling its business. See our analysis of this acquisition by Jacobs of Wood plc’s nuclear engineering business.

Semcon Resumes Acquisitions in Its Product Information Unit

We rarely talk about Sweden’s Semcon. The company has financially struggled for several years, but in the past year, it has improved its financial position and reinvested in its portfolio of services across its Engineering and Product Information (PI) business areas.

Semcon will acquire Xtracto, a Swedish systems integration firm active in Learning Management Systems (LMS), notably around Totara Learn and Adapt Build software applications. Xtractor is a small firm with revenues of SEK 50m and 40 employees but is strategic as it helps to position TI beyond technical documentation to LMS software services. Recently, Semcon had positioned its PI business area in aftermarket services, notably thanks to AR-based remote diagnostics.

Sweco Acquires a Danish Architecture Firm

Still, in Sweden, Sweco strengthened its presence in Denmark, with the acquisition of an architect firm, Kant Arkiteketer (KA). KA service the public sector’s learning and housing markets. It has a headcount of 75 and revenues of DKK 90m.

This is a counter-cyclical acquisition. The housing market continues to suffer in Denmark, something that both Sweco and AFRY have reported. We suspect the price was attractive to Sweco. Also, Sweco continues to scale up its architect business, which now has 1,150 architects, including 320 in Denmark.

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