Cognizant looks for “5–10 deals a year”
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Cognizant looks for “5–10 deals a year”

Cognizant Technology Solutions, a multinational provider of IT services including digital, technology, consulting and operational services, is looking to pursue M&A activity in a bid for growth. The company has said it is looking for “5-10” acquisition targets annually – that puts it amongst the more aggressive acquirers in the sector, but by no means amongst the most aggressive. While the company has no specific plan to spend billions, there is no guarantee that these deals would be particularly small either.

Cognizant’s share price has risen by 30% year to date

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SOURCE: Yahoo Finance

Karen McLoughlin, Cognizant’s chief financial officer, told investors at a conference in New York last week: “We have publicly stated that we would lie to ramp up the volume of M&A deals, certainly not to the extent of some of our competitors, but certainly 5-10 deals a year would be comfortable. Most of the deals would continue to be smaller tuck-in deals. But in our mind a tuck-in deal could be anywhere up to a couple of hundred million dollars.”

McLoughlin said that big deals weren’t off the table, they just weren’t the focus: “we certainly would look at larger deals, but there aren’t a ton of them.”

The U.S. based firm will likely be hoping to find smaller companies with niche capabilities, letting them win new digital areas. This could be a key component in raising its margin to meet requirements set out in a new strategic plan, created to answer criticisms from activist investor Elliott Management. It could also help the company continue win new business in what is currently a challenging market.

Disclosure

Dominion holds Cognizant Technology Solutions in its Global Trends Managed Fund.


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