Cognizant To Acquire Netcentric For Digital Marketing – Seeking Alpha

Quick Take

IT consulting company Cognizant (CTSH) has agreed to acquire Netcentric for an undisclosed amount.

Netcentric is a prominent Adobe Experience Cloud digital partner with operations in Germany, Switzerland, Netherlands, Spain, Romania and the UK.

Cognizant is moving boldly to add significant capabilities in the digital marketing space, especially in the UK and Europe, bringing on 600 professionals with its proposed acquisitions of Netcentric and Zone digital agency.

Target Company

Zurich, Switzerland-based Netcentric was founded in 2012 to provide brands with outsourced digital marketing strategy, implementation and operations using the Adobe Experience Cloud.

Management is headed by CEO Elian Kool, who has been with the firm since 2012 as head of technology. He was promoted to CEO in 2016.

Netcentric’s primary offerings include:

  • Business Consulting
  • Technical Consulting
  • Marketing Automation
  • Customer Experience Design
  • Personalization
  • Development using Adobe Experience Cloud
  • Business Operations
  • Application Operations & Support

Netcentric’s funding history is unknown, although given its size and number of offices throughout Europe, it is likely the firm received undisclosed, outside investment.

Market & Competition

According to a May 2017 post by digital IT research firm Source Global Research, it previously believed that most of the annual spend on IT initiatives would go to technology firms at the expense of strategy firms.

The post cited the latest data indicating the opposite. It estimates that 22% of IT spend with the ten largest consulting firms has gone to strategy-focused firms, with 21% to the Big Four and 16% to technology firms.

Moreover, 70% of all organizations ‘say their focus in the future will be using digital technology to change their underlying business model.’

While Netcentric has significant competition with the Big Four and numerous other digital marketing consultancies large and small, its focus on the Adobe Experience Cloud has enabled it to land major clients such as Mercedes-Benz (OTCPK:DDAIF), Allianz (OTCQX:AZSEY) and UBS (UBS)

Acquisition Terms and Rationale

Neither firm disclosed the acquisition price or terms and Cognizant didn’t file an 8-K or disclose a change in financial guidance, so the deal was likely for a non-material amount.

Just following its deal with Netcentric, Cognizant agreed to acquire UK-based digital marketing agency Zone for an undisclosed amount, as I wrote about in my article, Cognizant Agrees To Acquire Zone Digital Agency.

So, Cognizant is making some bold moves to build out its digital marketing consulting capabilities in Europe.

As Cognizant stated in the deal announcement,

Netcentric’s digital marketing teams in the United Kingdom, Netherlands, Switzerland and Germany, as well as regional delivery centers in Barcelona and Bucharest, will enhance Cognizant’s ability to deliver business critical digital experience solutions for clients in Europe and around the world.

Cognizant will be incorporating Netcentric’s 380 professionals into its operations, so the deal will be a sizeable addition to its European footprint. This is in conjunction with the Zone deal which will add another 220 professionals.

Cognizant is among the few larger IT consulting to be making these moves into digital marketing. Notably, Accenture (ACN) has been aggressively acquiring agencies and technology consultants in the space to build out its marketing consulting capabilities.

I believe others will start to figure out that digital marketing is a technology piece worth pursuing and that we will see more of the major IT consultants making moves to shore up their offerings.

I write about M&A deals, public company investments in technology startups, and IPOs. Click the Follow button next to my name at the top or bottom of this article if you want to receive future articles automatically.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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