In a move that highlights how technology has touched every part of the enterprise, IT research firm Gartner has acquired CEB, a talent management and best practices consulting firm, in a deal worth $2.6 billion.
The deal including $700 million in CEB debt is worth $3.3 billion. CEB shareholders get $54 in cash and 0.2284 shares of Gartner for each CEB share they own. The offer is a 30 percent premium for CEB shareholders. Gartner said CEB will immediately be accretive to earnings.
Gartner is paying up because it aims to expand its research and advisory services into more enterprise functions. The firm also said it will issue 8 million shares and use debt to fund the CEB purchase.
In a slide, here's why Gartner is doing the deal.
Gartner said it can offer double digit contract growth for CEB in the third year after the deal closes. Gartner said it can save about $25 million to $50 million in annual costs starting in 2018.
The real bet here is that Gartner thinks it can help CEB's retention rates and sales productivity to bolster wallet share. Ultimately, Gartner plans to expand research and advisory services into more midsize companies.
Gartner has been on an acquisition tear as of late, as it has acquired Software Advice, Capterra, GetApp, and SCM World. In 2009, it consolidated research with the purchases of AMR Research and Burton Group.
According to Gartner, the combined companies will have $3.3 billion in annual revenue, $463 million in free cash flow, and net debt of about $3 billion. Average borrowing costs are expected to be between 4.25 percent and 5 percent.