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Accenture Cuts Shareholder Returns as Acquisition Spending Rises
Accenture plans to give shareholders less money this year than it did last year.
Shareholders receive money through dividends and when the company buys back its shares.
At the same time, Accenture plans to spend more money buying other businesses.
It expects to spend $8 billion on acquisitions, including $3 billion on cybersecurity companies.
The company says buying businesses can help it grow in important areas and prepare for the future.
Its long-term debt also rose sharply, reaching $10 billion last fiscal year.
Analysts say this strategy could influence Indian technology companies.
They disagree on whether holding back on acquisitions could put those companies at a competitive disadvantage.
Accenture expects to return at least $9.5 billion to shareholders in the fiscal year ending August 2027, down from $11.5 billion the previous year.
The company plans to spend $8 billion on acquisitions, its largest annual budget since going public in 2001.
Of the planned acquisition spending, $3 billion is earmarked for cybersecurity deals deferred to this fiscal year.
Accenture’s long-term debt nearly doubled year over year to $10 billion in the previous fiscal year.
Analysts said the shift toward acquisitions could signal a need for Indian IT firms to reconsider how they balance shareholder payouts and investment.
- Who
- Accenture Plc, its management, and analysts discussing the company’s capital allocation.
- What
- Accenture expects lower shareholder returns while increasing acquisition spending.
- Where
- Accenture is headquartered in Dublin; the article also discusses implications for Indian IT services firms.
- When
- The current fiscal year ending August 2027; the company’s previous fiscal year ended before it.
- Why
- Accenture says acquisitions can help it grow in high-growth areas and expand into new areas for long-term growth.
Invest in acquisitions
Protect shareholder returns
Capital allocation priorities
Invest in acquisitions
Accenture and analysts cited in the article argue that acquisitions can build capabilities in areas clients will pay for and support long-term growth.
Protect shareholder returns
The article reports that Accenture’s expected shareholder payout is falling; its spokesperson said the company’s capital allocation approach remains unchanged.
Implications for Indian IT firms
Invest in acquisitions
Phil Fersht said avoiding acquisitions could create competitive risk as technology services firms may need to invest in capabilities.
Protect shareholder returns
Indian IT firms have traditionally maintained disciplined balance sheets and returned substantial capital to shareholders, according to Fersht.
Key facts
- Expected shareholder returns
- At least $9.5 billion in the current fiscal year, compared with $11.5 billion in the previous fiscal year.
- Planned acquisition spending
- $8 billion in the current fiscal year, the highest annual amount since Accenture went public in 2001.
- Cybersecurity acquisitions
- $3 billion of planned acquisition spending is expected to go toward cybersecurity firms deferred to this fiscal year.
- Previous-year shareholder returns
- $4 billion in dividends and $7.5 billion in share repurchases.
- Long-term debt
- Nearly doubled year over year to $10 billion in the previous fiscal year.
- Previous fiscal-year revenue
- $74.2 billion, up 6% from a year earlier.
- Operating margin
- 15.4%, up 70 basis points year over year; Accenture expects an adjusted increase of 10–30 basis points this year.
Quotes
Julie Sweet
Chief executive of Accenture
“As part of our growth strategy, when we see significant opportunities in the market through acquisitions to either grow in really high-growth areas like data and AI, and to expand into new areas like we've done with data centers, we've done with data and OT security, we go after them because that's how you position for long-term growth.”
livemint.com
“Accenture’s capital allocation is a strong signal that standing still and protecting cash may ultimately carry a greater competitive risk than investing aggressively in the capabilities clients will pay for next.”
livemint.com
Sushovon Nayak
Lead IT analyst at Anand Rathi Institutional Equities
“Accenture is taking on debt to probably fund its acquisitions and also returning capital to shareholders via dividends / buybacks. What we see currently is that Accenture is going all in to make itself future-ready through platform and capability-based acquisitions rather than spending excess money on shareholders.”
livemint.com
Sources
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