Accenture Gets Big in Germany with Umlaut
Accenture Makes Big Transaction in Germany with Umlaut
Accenture made a big move with the acquisition of Umlaut, an ER&D vendor headquartered in Germany. The transaction comes as a surprise: umlaut brings EUR 350m in revenues. It is the first sizable acquisition that Accenture made for Industry X. Up to now, Accenture had overall favored tuck-in transactions. Furthermore, we were expecting Accenture to favor an Indian sourcing approach. Umlaut, with its 4,200 employees, tells, therefore, a different global delivery story. In other words, we assumed Accenture Industry X was building a front-end onshore and scaling up in India.
umlaut Is A Spin-Off from P3 Group
Industry observers will remember that Umlaut is a 2019 off-spring of the better-known P3 Group. P3 came into existence as Fraunhofer Institute for Production Technology spin-off. According to Germany Electrive.net, which reported the foundation of umlaut: P3 managed two entities independently. P3 focused on software for the automotive sector, electric vehicles, and mobility. Umlaut had wider client space, spanning automotive, aviation, and medical devices. While P3 wanted to remain a privately-owned business, Umlaut executives wanted to cash their investment, potentially through an IPO. Umlaut, with its 4,300 employees in 2019, four times as large P3 (1,000).
Since the spin-off, Umlaut has emerged as a digital ER&D vendor with software development, medical device design, and aircraft retro-fitting capabilities. The company made a small acquisition in March 2021 with an automotive engineering specialist, Prozesswerk. Munich-based Prozesswerk brought E/E development, quality management, process, and organizational consulting capabilities. It had a headcount of 30. umlaut also took full control of its Umlaut Telehealthcare subsidiary from minority shareholder Docs in Cloud in November 2020. Telehealthcare designs and manufactures its Telenotartz product, a communication device used in accident sites and ambulances for providing medical support.
Consolidation of the German R&D Market
The German ER&D service market suffered during the pandemic, with automotive down sharply along with aerospace. The country’s industrial equipment industry was also under pressure, but not to the extent of automotive and aerospace. Since the pandemic, the automotive sector has resumed its ER&D tender activity and started awarding contracts, as Akka and EDAG have signaled.
The sale of Umlaut comes after another significant acquisition, that of ESG Mobility by Cognizant. The time of these transactions is odd though, as surely the valuation of the sold companies will have been impacted by the pandemic. Also, it would not reflect their high potential, given that the German automotive industry, led by VW, is successfully transitioning to electric vehicles. The future of the German ER&D industry is bright for ER&D vendors active in digital technologies. Why sell now?
Unauthorized reproduction is prohibited. Please contact us if you have any questions.