Logica CMG merger will be good news for users

Experts have predicted that the planned merger between ITservices firms Logica and CMG will be good news for users seeking a...

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.

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