Hitachi Consulting buys UK's Edenbrook

(By Richard Holway 4.00pm 8th Apr 09)
Hitachi Consulting has acquired the UK’s Edenbrook. Edenbrook was setup in 2001 and provides enterprise implementations (particularly around Oracle and Microsoft) with all the usual associated consulting, project management, managed services etc. It was the typical small to mid-sized player with revenues of around £28m in 2008 making typical IT service company high single digit profit margins. As we have said before many times, small to mid-sized is an increasingly uncomfortable place to be in that type of market. So being part of someone else’s consolidation play was always on the cards. No consideration details were announced but companies like this would normally command valuations of up to 1x revenues.

It’s interesting that the acquirer is Hitachi. – not a company well known for its IT consultancy in the UK market. Indeed, Edenbrook will form the lion’s share of Hitachi Consulting UK as their press release claims that the new combined operation will have ‘more than 300 consultants in the UK and 50 in an associated offshore delivery centre in Pune, India’. Hitachi UK will have revenues of c£46m after the deal. Indeed, hats off to Edenbrook for building this Indian capability over the last two years. We also understand that David Kilpatrick, Edenbrook’s CEO will head the new UK operation. There will be 4 Edenbrook executives in the top 6.

Two years ago, in Apr 07, Hitachi Consulting had acquired another UK consultancy – Impact Plus – that specialised in the public sector and financial services sectors.

Hitachi Consulting currently has revenues of c$500m - most in the US. I spoke with David Bailey (Hitachi Consulting's VP of international Development) tonight who told me that they aimed to double in size to c$1b in next three years. Currently in Europe there is relatively little outside the UK and 80 consultants in Iberia. Acquisitions should be expected in France and Germany; along the lines of the Edenbrook deal except with an SAP focus in Germany. Hitachi Consulting wasn't on our radar screens before - clearly that will now change!