Service consolidation

Consolidation in the IT services sector has gathered momentum in recent weeks, driven by growth in IT outsourcing, telecommunications and business process management; robust demand from important verticals such as government and healthcare; and low company valuations.

The highlight of Europe’s recent mergers and acquisitions activity, however, has been the emergence of one particularly acquisitive consultancy, Finland’s TietoEnator, as a substantial player in the Nordic region.

TietoEnator, which had already completed six acquisitions earlier in 2002, added three more to that list: Ericsson InfoTech, Ericsson’s Sweden-based software development and maintenance unit; Enterprise Systems, a healthcare services company; and Araneum, a Danish web development consultancy.

TietoEnator paid SEK500 million (EU55m) for 860 Ericsson employees – taking TietoEnator to more than 3,600 staff. Under the terms of the deal, TietoEnator also inherited a two-and-a-half year agreement to develop and maintain software for Ericsson’s fixed and mobile networks. The Ericsson order book is estimated to be worth some SEK800 million (EU80m) to TietoEnator a year. TietoEnator bosses have said they are considering buying other units from Ericsson, which is in the midst of a reorganisation.

TietoEnator bought Enterprise Systems primarily for its customer base in the Danish healthcare and pubic sectors. The target company also develops software for storing clinical data. Araneum, for its part, appealed to TietoEnator because of its public sector and multinational clients.

Elsewhere, there was further evidence of major consolidation in IT services

UK IT services specialist Logica paid EU3.6 million for eGlobal Pacific, an Australian provider of services for German software giant SAP’s products. Logica wants to provide SAP services globally. Separately, Logica has been in merger talks with UK rival CMG. A combined company would be Europe’s biggest IT services company. A merger could help it compete with mobile equipment giants such as Ericsson in the mobile multimedia messaging software and services market, says Julian Hewitt, an Ovum analyst.

Systems and IT services giant IBM acquired the application services division of EADS Matra Datavision for an undisclosed fee. IBM, which at the same time completed its EU3.5 billion acquisition of the consultancy division of PricewaterhouseCoopers in October 2002, wants Matra Datavision for its product life cycle management capabilities.

Israel-based Crystal Systems Solutions, meanwhile, a supplier of application migration services away from legacy systems, acquired fellow Israeli application development tool vendor Liraz Systems for EU7.7 million in October 2002. Crystal wants to combine its legacy system integration services with Liraz’s application development tools, enabling businesses to extend their applications to external partners and deploy web services.


Recently announced mergers and acquisitions
Buyer   What it does   Country   Target   What it does   Country   Price EU  
Adonix Business application s/w France Abel Asset mgmt s/w France 8.6m
Borland Software App dev tools US BoldSoft MDE Design tools Sweden N/a
Crystal Systems IT services Israel Liraz Systems System apps Israel 7.7m
Datatrack Electronic data capture sols US Oriam S/w for pharmaceutical ind France N/a
DoubleClick Internet marketing and ads US Protagona Marketing automotion s/w UK 13.1m
ECI-NGTS Telephony solutions Israel NexVerse Networks Softswitch supplier US 24.3m*
Edotech Digital printing &archiving UK Cominformatic Outsourcing &doc imaging Switzerland N/a
Getronics IT services Neths Geronimo Payroll and benefits sys Netherlands N/a
IBM Systems, s/w &svcs US Matra Datavision* Engineering apps &svcs France N/a
Logica IT services UK CMG IT services UK 800.0m
Logica IT services UK EGlobal Pacific SAP consulting firm Australia 3.6m
Metris International Engineering svcs Belgium Paraform Engineering s/w Belgium N/a
Mforma Wireless platforms &tools US nGame Entertainment s/w UK N/a
Microgen Information mgmt svcs UK Wishstream Billing s/w US 1.5m
Microsoft Systems &office s/w US Rare Entertainment s/w UK 381.0m
Misys Fin svcs &healthcare s/w UK Eagleye Solutions Asset mgmt compliance s/w UK 23.4m
Scansoft Imaging &speech svcs US Royal Philips Electron Telephony/voice control units Netherlands 36.0m
Thomson Multimedia Diversified technology co France Canal+ Technologies Set-top boxes France 190.0m
TietoEnator IT services Finland Araneum IT services Denmark 2.1m
TietoEnator IT services Finland Enterprise Systems^ IT services Denmark 1.4m
TietoEnator IT services Finland Ericsson InfoTech GSM s/w Sweden 55.0m
USData Industrial automation s/w US Wizard Info Sys Industrial automation s/w UK N/a
Wolters Kluwer Information svcs Neths Tax compliance apps US N/a
* EADS Matra Datavision ^ Enterprise Systems Copenhagen All currencies converted to euros at current exchange rates.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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