Capgemini Unleashes M&A Blitz, Buying U.S. Digital Consultancy, Insurance IT Services Firm

Capgemini has purchased a digital strategy and design consultancy and a provider of managed services for the insurance industry to boost its North American capabilities.

The Paris-based company, No. 6 on the CRN Solution Provider 500, said its acquisitions of Palo Alto, Calif.-based Idean and Columbia, S.C.-based TCube Solutions would enhance its digital design and strategy skills and its expertise around Duck Creek Technologies, a provider of insurance software and services.

"Service providers who bring digital design, creativity, and agility to redefine the customer experience are developing a strategic dialog with their clients, driving uniquely differentiated outcomes, and gaining market share," said Paul Hermelin, Capgemini's chairman and CEO, in a statement. "Idean's Scandinavian design ethos and Silicon Valley mindset are a perfect fit."

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Idean works with clients such as LG, Mercedes-Benz, Sony, Volkswagen, Airbus, IBM and Intel on digital user experience, customer experience, and digital strategy. The company said it engages with clients around envisioning strategic opportunities, designing and building digital experiences, and developing competencies in new ways of working and design thinking.

The company was founded in 1999 in Helsinki, Finland, and employs more than 150 digital strategists, experience designers and front-end developers across the United States and Europe. Idean's clients include Bay Area start-ups, global tech leaders based on the West Coast, prominent automotive and consumer electronics brands, and companies reinventing themselves for the digital era.

"Joining forces with Capgemini is extremely exciting and the logical next step of our journey," said Risto Lahdesmaki, founder and CEO of Idean, in a statement. "Idean clients will immediately benefit from an expanded and extensive portfolio of services for digital strategy and CX [customer experience] transformation, deep industry expertise in connected vehicles and IoT, and global end-to-end delivery."

Lahdesmaki will join Capgemini as part of the acquisition. Capgemini executives weren't immediately available for additional comment.

TCube Solutions, meanwhile, specializes in property and casualty insurance software and services, with offerings around integrated policy management, billing, claims operations, reinsurance management systems and data strategy. The company started in 2007 and employs more than 300 people focused on the systems integration needs of insurance clients in North America and the United Kingdom.

"TCube Solutions' growth trajectory and commitment to delivery makes it a natural fit for Capgemini," said Thierry Delaporte, CEO of Capgemini Financial Services, in a statement. "Their market leading services and skill set in Duck Creek Technologies' based offerings opens up new possibilities for Capgemini to address the needs of the insurance industry and our strategic client base worldwide."

Both Sam McGuckin, TCube's president and CEO, and Sabyasachi Patnaik, TCube's delivery lead, will join Capgemini. McGuckin said Capgemini's broader customer base would benefit from TCube's established solutions and services, while Capgemini will provide TCube's current customers with more tools around business transformation.

"We have worked hard to build a strong team with key skills and expertise that are in great demand in today's fast-moving insurance market," Patnaik said in a statement. "As part of Capgemini, we are looking forward to helping a much wider base of clients build more agile insurance services to enhance their customer experiences."

North America is Capgemini's largest region, accounting for 30 percent of overall revenues, thanks to the company's July 2015 acquisition of $1.3 billion solution provider iGate of Bridgewater, N.J. Capgemini's North American revenue in 2016 exploded to $4.06 billion, up 14.3 percent from last year due to the addition of iGate and strong financial services and manufacturing sales.

"The successful integration of iGate delivered higher synergies than expected and contributed to the further improvement in the operating margin in 2016," Hermelin said. "The combined Group portfolio of offerings – particularly in platforms – are a great success with clients and former iGate top accounts show sustained growth."

Globally, Capgemini's 2016 sales climbed to $13.39 billion, up 5.2 percent from $12.72 billion last year, driven by 29 percent growth in digital and cloud revenues after factoring out changes in foreign currency exchange rates. Net profit, though, tumbled to $983.5 million, or $5.61 per diluted share, down 17 percent from $1.2 billion, or $6.76 per diluted share, last year.

Capgemini shares rose 2.41 euros (3.05%) to 81.49 euros in late morning trading on Thursday. The company's financial results were announced before the Euronext stock exchange opened.

For all of 2017, Capgemini said it expects non-GAAP earnings of $6.51 per share. The company also expects sales to grow by 3 percent after factoring out changes in foreign currency exchange rates.