Convergence to Solutions – Drivers of Today’s M&A Strategy

Fujitsu America yesterday announced that it has expanded its relationship with SAP so that it is in a better position to sell solutions to its clients. Specifically, the press release referenced, “Fujitsu America now provides solutions that encompass all facets required for successful implementation, including software licensing, services, training and documentation, staffing, and optimization and support.” This is the trend we saw beginning two years ago when we formed Clearsight that is now in full swing. Fujitsu is the latest in a cadre of large global companies that is responding to the need to help their clients more comprehensively by offering a full solution – rather than a series of discreet products and/or services.

We are seeing this play out across the board and the result is a strong strategic demand by these leading organizations to identify the right acquisition candidates that help them create the end-to-end solution. Most of the firms we speak to are looking to help design, build, maintain and sometimes run the appropriate solution for their clients. This has product companies looking to add high-end consulting services (the design component) as well as BPO businesses the maintain & run piece of the puzzle) to their existing high quality hardware and/or software assets. It also has high-end consulting businesses and BPO providers looking to add their missing puzzle pieces as well. We are seeing this across industries such as: healthcare, financial services, energy, etc. In addition, all of these groups are looking to identify “information services” businesses that can add or mine proprietary data and analytics to help their clients create real actionable intelligence and optimize their own businesses.

The implications for the M&A markets are unprecedented. The cross-sector M&A between services, products (software and hardware) and information services is accelerating at an extraordinary rate. This convergence is at the heart of why Clearsight was formed and it is truly starting to play out across our portfolio of clients. Right now we are seeing high-end management/strategy consulting firms leading the way as the “tip of the spear” in this new paradigm. The focus on consulting is followed closely by the information services angle. We expect to see this play out with a myriad of deal announcements and strategic shifts to “solutions” over the remainder of 2014,well into 2015 and beyond.