Gartner has agreed to buy consulting firm CEB for $2.6 billion in cash and stock in a deal that will broaden Gartner's departmental reach within enterprises. Gartner will also assume $700 million in CEB net debt, for a total enterprise value of $3.3 million.
The acquisition is scheduled to close in the first half and is by far Gartner's biggest. In 2009, it acquired AMR Research and Burton Group, deals that brought in more supply chain expertise and services for front-line IT professionals, respectively. More recently, Gartner acquired Capterra, Software Advice and Nuberra, three companies focused on enterprise software selection.
CEB extends Gartner's advisory footprint into human resources, sales, finance and legal, beyond its current services for IT, marketing and supply chain. Given how much IT buying is occurring directly in departments covered by CEB, the synergies are obvious. The deal will also help Gartner reach "business leaders across every industry and size of enterprise worldwide," according to a statement.
Other parts of the plan include, naturally, cross-selling Gartner and CEB's services. Together the companies have 20,000 enterprise clients but it wasn't immediately clear what level of overlap that number includes.
For the three months ended Sept. 30, Gartner's revenue rose 16 percent year-over-year to $461.5 million, but net income remained essentially flat at $30.5 million. Gartner expects annual cost synergies of between $25 and $50 million annually by 2018, double-digit long-term growth and double-digit contract growth for CEB within three years of the closing.
This looks like a good deal for Gartner, but one it essentially had to do, and now execution will be the key to its success, says Constellation Research founder and CEO R "Ray" Wang.
"Gartner's legacy business has played out," Wang says. "CEB has done a great job of building communities. This natural extension brings together more than just the IT side of the house and helps Gartner move into the executive ranks. So long as Gartner does not try to 'Gartner-ize' CEB, the model will be in good hands."
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