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ICF International (ICFI)
ICF Will Acquire Macro International in $155M Deal
The global economic slowdown is impacting companies any many different ways. Some are falling apart, some are cutting employees, and some are shifting the focus of their business to more profitable areas. Acquisitions are the last thing on the agenda for some companies mainly because they are trying to hoard all the cash they have, so that they can survive this downturn. ICF International, a global professional services firm, is taking another approach to ensure that the company will be able to survive this recession. The company announced on Monday that it will acquire Macro International Inc. for $155 million in cash with the hopes of expanding its health-related consulting business. Why has the company decided to acquire Macro International during these tough times? How will this acquisition impact their business going forward?
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ICF International has been in business for over 40 years and during that time the company has provided technology solutions for a number of government and commercial clients across the world. The company reported gross revenue of $697.4 million in 2008. Macro International, a 700 person company based out of Washington, D.C., is small in comparison to ICF. However, ICF foresees a lot of growth potential for the company after the acquisition. One of the most obvious reasons for the acquisition is the fact that the health industry is continuing to thrive during these tough times. People will continue to get sick and rely on the health industry to address problems despite the condition the economy is in. The company is aware that they need to continue to diverse their business to remain profitable during these tough times and this acquisition is part of that strategy. With budgets being slashed across the board, it can almost be expected that the company's consulting business would start to dwindle as the government and other commercial clients shift funds to more important areas.
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Another reason for the acquisition may be the fact that the company was able to acquire the company for a good price. This is not the first time that Macro International has been acquired. The company has been acquired by two other companies over its 43-year history. It was acquired by the Opinion Research Corporation in 1999, which was then acquired by its current parent company, InfoGROUP Inc in 2006. InfoGROUP (IUSA: Charts, News, Offers) is in need of some additional capital to pay down some debts and strengthen its balance sheets. A Chief Executive at InfoGROUP said “Macro's focus on governmental social research is not a strategic fit for the company's overall portfolio of businesses.” The truth of the matter is that the company really needed the additional capital. Some investors are still wondering what impact this acquisition will truly have on ICF?
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The most apparent and beneficial impact will be the clients that ICF will take on as a result of the acquisition. Macro International has clients in 125 countries and has annual revenues of approximately $150 million. The acquisition will also allow the company to focus on an area that they believe has the most growth potential. ICF's chairman and CEO Sudhakar Kesavan reiterated this point by saying, “This transaction illustrates an important element of ICF's growth strategy-to acquire profitable, high-quality firms that provide significant growth potential and cross-sell opportunities in our key markets.”
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It's apparent that ICF is doing what they can to ensure that their business will continue to be successful. ICF believes that the acquisition will give the company revenue of between $645 million to $675 million in 2009, so hopefully they will be able to achieve those results. Shares of ICF and InfoGROUP declined during morning trading.
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Click here to view a detailed profile of ICF International.
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