Quick Take
IT services company Cognizant (NASDAQ:CTSH) has acquired Brilliant Service Co. Ltd. of Japan for an undisclosed amount.
Brilliant will add mobility and Internet of Things [IoT] skills to Cognizant’s digital solutions consulting group.
The acquisition is part of a larger and consistent strategy to add both capabilities and geographic reach through smaller, tuck-in deals.
I view the deal as primarily a team acquisition, and should be a net long-term positive for CTSH as it integrates the team and continues the build out of its mobility and IoT practice for a growing market.
Target Company
Osaka-based Brilliant Service was founded in 2004 to provide iOS and Android platform applications primarily to Japanese enterprises.
It has capabilities in creating digital solutions for smartphones, wearable terminals and embedded devices
The company has a customer segment focus on telecommunications, consumer goods and manufacturing & industrial companies.
Brilliant was headed by CEO Yoshihiko Sugimoto and a total of ’70 professionals with extensive digital solutions experience and insights in the Japanese market’ will move to Cognizant with the transaction.
Acquisition Terms, Rationale and Commentary
Cognizant has acquired Brilliant to bolster its commitment to the Japanese market and expand its footprint across Osaka and Tokyo.
Since Brilliant doesn’t appear to own any significant IP and its revenues are likely non-material to Cognizant’s annual revenues of $13.5 billion, I presume the deal valuation was primarily based on acquiring the 70-person team.
By adding Brilliant’s skills in ‘planning, implementing and managing smart and connected device solutions, together with their strong understanding of the regulatory requirements for the Japanese market’, Cognizant hopes to improve its penetration into that market.
‘Connect device solutions’ is an important and expansive phrase, which for Cognizant means ‘Internet of Things’, or IoT.
As 5G wireless begins to ramp up and the IoT applications continue their growth as well, Cognizant is essentially acquiring a beachhead in the important Japanese market, which could be considered an ‘early adopter’ market due to the high penetration of electronic devices in the country.
Also, the acquisition will help Cognizant with its enterprise mobility initiatives, since Brilliant has expertise in the area of ‘user experience design and online-to-offline services.’
For Cognizant, the Brilliant deal represents a continuation of an apparent digital acquisition strategy.
The company has acquired a number of companies as part of its ‘Digital Works’ program, a consulting-centric offering within its digital portfolio.
As Cognizant CEO Francisco D’Souza said in a 2016 conference call, “We look at traditionally smaller tuck-in acquisitions. That’s been the primary focus. We will continue to do that. We would be more focused on digital and making digital acquisitions as we look to the next few quarters to bolster our digital capability.”
So, the Brilliant Service deal is squarely within the scope of management’s previously-announced intention to tuck-in smaller acquisitions that improve its offerings and expand its footprint.
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