Merger – This Time In Services Arena

LogicaCMG is acquiring Unilog SA, France's sixth-largest information-technology services provider, for 1.14 billion. Look at the Numbers :
- < 2 times the sales
- > 25 times the net profit
Logica had been saying for sometime that it was looking at acquisitions in France and Germany in order to build scale and accelerate the return to profitability of Logica's units in those regions. Typically mergers are aimed at augmenting strengths in newer technologies, markets or broaden/improve the range of service offerings. By acquiring a company almost four/five times bigger than it in France, Logica is clearly getting stronger in French markets. France itself accounts for a significant size of Europe’s service markets. LogicaCMG's acquisition of Unilog will double the size of its German operations, providing a platform for growth in the region. Service firm merers are generally difficult to complete to deliver best results as cultural, methodology conflicts could be overwheleming - here is perhaps a case of two seemingly similar organisations coming together and hopefully a manageable merger at that. Over the past year, LogicaCMG has struggled in France and Germany, with both markets providing little growth for IT-services companies. Atos Origin SA and Capgemini SA also planning to seek acquisitions beginning next year, the market sort of heats up. With Siemens announcing, restructuring plans,the market is set in for a significant change. With India heeaquartered IT service majors also beginning to focus in the region more aggressively, coupled with a nearly static growth market in traditional areas, we shall see lot more efficiencies coming out .IBM seen as the leader by a significant margin here can be expected to push a little more aggressively to consolidate its leadership. These consolidation signs come as companies have shown increased demand for outsourcing, consulting and IT services in Europe giving a new thrust to the momentum in the market.