LogicaCMG is planning to acquire Nordic competitor WM-Data in a deal worth 882 million, making it the seventh largest IT services company in Europe, and one of the top 20 worldwide.
If the deal goes ahead, the new company will employ 40,000 employees with a presence in more than 40 countries.
"Increasingly, our customers want to do business with a smaller number of larger suppliers who can provide them with a broader range of offerings and support them internationally," said LogicaCMG's chief executive Martin Read.
"WM-data's leading position in the Nordic region will complement our existing strong positions in the UK, the Netherlands and France. The geographical overlap between the two companies is minimal and there are significant opportunities to cross-sell products and services across the two businesses. There is also a strong cultural fit between the two organisations."
The announcement raised a numbers of analysts' eyebrows.
"While we applaud LogicaCMG's ambition and determination, the acquisition raises some major issues," said Douglas Hayward, senior Ovumanalyst in a briefing note.
"First off, WM-data is certainly no growth engine. Indeed, it is notable that a company that grew about 5 per cent organically in 2005 (LogicaCMG) is buying a smaller company that's actually growing more slowly - about 3 per cent organically in H1 2006. With almost no geographical overlap between the two, cost synergies are minor (15 million per year, at a one-off cost of 22 million). So if this deal is to unlock value at WM-data, it must do so through revenue synergies."
Hayward said that unlocking value may prove difficult in a low-growth market, adding that this may be the first of a series of acquisitions of this ilk.
