Engineering services has emerged as the fastest growing segment of the global services industry: enterprises are increasingly focusing on developing engineering products that can integrate into the connected digital consumer ecosystem, driving the demand for engineering services. Everest Group estimates the engineering global sourcing industry, including both service providers and Global In-house Centers (GICs), will grow at an annual rate of 14-16%, reaching US$145-155 billion by 2020.

As service providers prepare to ride on this wave of growth, they are making significant investments in building internal assets, expanding delivery capability, and upskilling their talent. Some service providers are also following the inorganic route to gain market share, acquiring companies to enter new markets and/or gain niche capabilities.

One such example is the recently announced acquisition of U.S.-based design and engineering firm Aricent by France-based engineering services leader Altran for a total enterprise value of US$2 billion. While Altran has made at least 15 acquisitions over the last four years, this one stands out in the market in terms of sheer scale. It also portends an impending consolidation wave.

This Viewpoint discusses the details of the acquisition and the key factors that make this a favorable bet for Altran, as well as implications that the acquisition will have on the broader market–both enterprise buyers and service providers.

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