Experts have predicted that the planned merger between ITservices
firms Logica and CMG will be good news for users seeking a stable
but innovative supplier. The move will create one of Europe's
largest quoted IT services businesses.
Robert Morgan, chief executive at outsourcing consultancy Morgan
Chambers, said, "This bodes extremely well - the combined unit
makes them attractive to users." Both CMG and Logica have a good
reputation for building things that are fit for purpose and
delivering them on time, he added.
Logica has built up a sizeable client list in the UK, particularly
in the public sector. Organisations that have signed deals with the
services firm include the London Borough of Waltham Forest and
British Waterways.
Logica is also developing the new Compass case management system
for the Crown Prosecution Service, which is at the heart of the
Government's plans to overhaul the technology within the UK's
criminal justice network.
Analysts believe the deal between Logica and CMG will increase the
trend towards consolidation in the IT services market. In the
current economic climate, users prefer to work with larger
businesses that are perceived as offering greater security and
stability.
Morgan explained, "It is a question of the long-term viability of
any organisation." Companies of the size of Logica and CMG also
understand how to innovate because they are so much closer to the
client, he added.
If the merger, which is now subject to due diligence, goes through,
Logica shareholders will end up owning 60% of the new firm and CMG
shareholders will own the remainder. The combined company would
have a market value of about £910m.
Morgan believes this too could be positive for users. "I think that
Logica and CMG will use their money to maybe acquire some smaller
public sector specialists, which is good news for users," he said.
The deal would make the company one of the largest players in the
European IT services market. The merger would also allow it to
compete against Nokia and Ericsson in the next-generation
multimedia messaging arena.
The drive towards industry consolidation appears to be
intensifying. IBM recently completed its takeover of PwC
Consulting, the consulting division of PricewaterhouseCoopers, in a
£2.2bn deal.