The Nordic region’s biggest IT services companies both finalized prominent acquisitions in each others home territories just before the end of 2003, reflecting the intense consolidation in the region as local firms face up to global competitors.
TietoEnator, the region’s largest IT services provider, is paying $87m for Swedish IT consulting firm Ki Consulting & Solutions AB, a 770 employee organization specializing in integration, application management and development of telecom IT systems.
The company is expected to make revenue of approximately $107m in 2003, and TietoEnator claims the purchase will have an immediate positive effect on earnings per share. At the same time TietoEnator paid an undisclosed sum for the energy business operation of Halden, Norway based Retail System, a division of OMHEX, the stock exchange and technology services company.
TietoEnator’s expansion in Sweden with Ki comes after its closest Nordic rival, WM-Data, paid $234m to acquire Helsinki, Finland based Novo Group. The combined WM-Data/Novo business would create a firm with combined pro forma net sales of $1.27bn in 2002, and a workforce of 8,482 people.
The merger of WM-Data and Novo puts the combined company just behind TietoEnator, which made $1.4bn in 2002 and has 12,400 staff. The key factor behind the Novo acquisition is that it will significantly boost WM-data’s presence in Finland where it currently makes just 10% of its revenue or around $85.2m.
Matti Lehti, TietoEnator Corp’s chief executive has made several positive comments about the company’s future results, and the IT services market in general. Lehti expects TietoEnator’s core earnings before goodwill amortization to rise this year, and that the company will begin to see an upturn in IT spending. Lehti also believes his company will accelerate its acquisition strategy during 2004, buying more companies than in 2003, when it acquired five small businesses in the Nordic region.
Lehti is reported to have said this year’s focus will remain on smaller deals, particularly in the Telecoms and Media unit, a view that tallies with comments made by senior vice president and board member Eric Osterberg, who earlier in 2003 told ComputerWire TietoEnator would not get drawn into a large-scale Nordic merger.
Crister Stjernfelt, CEO of WM-Data, though, has struck a more pessimistic note. Stjernfelt has said he does not expect the market growth to outpace GDP in 2004, instead staying at around 2%, rather than the figures of up to 5% that have been forecasted.
Vendors such as WM-data are also facing increasing competition from large US rivals such as IBM Global Services, Accenture and Hewlett-Packard for lucrative Nordic-wide and global contracts originating from the region. These larger services firms are increasingly chosen by some of the most prominent Nordic clients because they can provide a much better global reach of services.
Unfortunately at the present time it seems that neither TietoEnator nor WM-Data are interested in overseas expansion, and both have dismissed suggestions of a merger with each other or other large Nordic players such as EDB Business Partner, Ementor, and Maersk Data.
And. although all these companies are acquisitive now, there inability to move out of the Nordic region may see them lose out on some of the region’s most prominent deals as companies such as IBM, CSC and Accenture increase their efforts. Although large, and growing acquisitively, the Nordic players are far from safe.
This article is based on material originally produced by ComputerWire.