Canadian Technology Giant CGI To Seek Cyber Security Acquisitions, Will Exit Low-Margin Markets

CGICGI Group Inc., the Montreal, Canada-based information and management consulting company, plans to target acquisitions in cyber security while exiting some markets entirely, according to Reuters. The company announced its growth plans in reporting Wednesday that third-quarter profit and revenue missed estimates.

Michael Roach
Michael Roach

CEO Michael Roach said cyber security is a high-growth, high-margin sector that his company, Canada’s largest technology company, has already targeted in its employee recruiting.

“We are hiring people,” Roach said. “The issue with that is that there are not enough of them.”

Responding To Market Demand

“We’re already very large in cyber but the rate of growth there and the fact that it’s globalized so rapidly means that customers are looking for professional firms like CGI to help them address the threat.”

High-profile incidents like the hacking last week of Ashley Madison, the website for cheating spouses, has boosted demand for cyber security. CGI identifed cyber security as one of the top five industry trends as a result of 1,000 client interviews in 2015.

Cyber security revenues have yielded double-digit growth on a year-over-year basis, Roach said. Cyber profit margins should be higher than in most other sectors following the investment of initial capital costs, he noted.

It (cyber security margin) would be on the higher end over time of the mix equation of a typical IT services company

Also read: Cyber Wars: Isis sympathizers hacking twitter accounts of American companies

85 Possible Acquisition Targets

CGI has compiled a list of 85 possible acquisition targets that would help the company grow by penetrating deeper into industries, he said. The company will focus on possible acquisitions after it went wide three years ago with its Logica acquisition at a price of 1.7 billion pounds ($2.65 billion).

The company was exiting or evading low-margin markets in the Middle East and Latin America, he said, the exception being Brazil. He added that the U.S. utilities market was underserved and represented an opportunity.

The company signed C$2.2 billion in contracts in the period, down from the C$2.5 billion a year ago. Sales suffered from emerging market exits and delays in business with the U.S. federal and the U.K. governments. Net income rose to C$257.2 million – 80 Canadian cents per share – in the three months to June 30, from C$225.1 million – 71 cents a share – a year earlier. Revenue fell 4 percent to C$2.56 billion.

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Lester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.