Capgemini buys engineering consultancy Altran for €3.6 billion

25 June 2019 Consultancy.eu

French professional services firm Capgemini has acquired engineering and innovation consultancy Altran for €3.6 billion, in a move that creates a group with more than 250,000 employees generating revenues of €17 billion.

“This combination enables Capgemini to take the lead in the digital transformation of industrial and tech companies,” said Paul Hermelin, chairman and chief executive officer of Capgemini, in a statement.

Companies in the industrial space, including aerospace, automotive, life sciences and telecommunications firms, are facing major threats and opportunities through the rise of emerging technologies. Trends such as artificial intelligence, cloud, edge computing, internet of things and robotisation – combined described as drivers of the fourth industrial revolution – are helping companies realise breakthrough innovation, revamp business models, and revolutionise operations.

Capgemini has a strong track record in the industrials landscape, supporting companies with management consulting (provided by Capgemini Invent), IT services and managed services. The addition of Altran, “a world leader in engineering and R&D services” according to Hermelin, will create the world’s largest player in the segment, and especially in the US and in Europe. The 54,000-strong division, of which 47,000 originate from Altran, will realise revenues of approximately €3.4 billion.

Capgemini acquires Altran

The global industry for engineering and R&D services is expected to grow rapidly in the coming years, at an average of 9% per year up to 2023, according to analyst firm IDC. Alongside expanding into a new lucrative, segment, Hermelin further highlighted how the deal provides the firm with critical mass in software engineering in two regions where it is seeking to grow: India and Eastern Europe.

The move comes at a time when consulting firms are showing growing interest for digital transformation and fourth industrial revolution offerings, as they seek to capitalise on a fast-growing market. From the Big Four and strategic consulting firms such as McKinsey and BCG to specialised operations consultancies, all are ramping up their offerings in the field, using acquisitions as a stepping stone.

Capgemini itself has also been quite active in the M&A space. Last year the Paris-headquartered company for instance purchased design studio Adaptive Lab in the UK, while it spent around $500 million to bolt-on US customer engagement firm LiquidHub. In 2017, Capgemini picked up Salesforce consultancy Lyons Consulting Group and French customer experience specialist Itelios.

In similar fashion, Altran too has a heritage of deal-making, with the acquisition of Aricent in 2017 for $2 billion the most notable one. The bolt-on added 10,500 employees to its headcount, of which 8,500 were based in India.

Integrated services and efficiency

As part of the integration plan, Capgemini expects to boost engineering and R&D services sales by €200 to €350 million on the back of up-selling such propositions to existing customers. The two companies also plan to achieve cost reduction of up to €100 million within three years after closing. With similar corporate cultures, Hermelin said that the integration of teams and assets is expected to run smoothly.

For Altran, this transaction will “create value for our customers, and is an outstanding opportunity to showcase the talent of our teams,” said Dominique Cerutti, since the summer of 2015 the global boss of Altran. “Capgemini is the ideal partner to build together a world leader in digital transformation.”

The deal is subject to regulatory approval but has been recommended and approved by the boards of both companies.