CGI Group’s big bet on the US… Perfect Timing?

Midway through 2010, Canada’s largest IT stock, CGI Group (TSX:GIB.A), completed the largest acquisition in its history, insisting that the price for Stanley, an Arlington, Virginia based systems integrator, was right. Early in 2011, gathering evidence suggests the acquisition may have been perfectly timed, too.

CGI was founded in Montreal in that city’s Olympic Year of 1976, and has since grown to nearly $4 billion in revenue. The Company’s name is an acronym for Consultants to Government and Industry. The acquisition of Stanley, which is located just across the Potomac from the US Capital and counts the U.S. Army, U.S. Marine Corps, U.S. Navy, Department of State, and Department of Homeland Security as its largest clients, is a clear bet on the former.

CGI paid $923 million for Stanley and integrated the acquisition on August 17th. By the time that Q4 revenue was reported CGI was already up $81 million or 8.7%, and management was saying the numbers were due “…predominantly to the acquisition of Stanley….”

But are the rapidly improving numbers for CGI, the company is also now recording record high margins, part of an overall trend? Research firm Forrester says the tech spending rebound is here to stay, estimating that global information-technology spending will grow 7.1% in 2011. What’s more they say that U.S. manufacturers and financial-services companies will be among the fastest growing tech buyers.

In the United States, the IT sector is finally showing signs of increased confidence. A new survey
released by the Computing Technology Industry Association showed that 43 percent of U.S. IT firms are planning to increase spending on new products and business lines over the next half year. 43 per cent may not seem that high, but it’s actually a increase of 10 percentage points from September, 2010. And the sentiment is nearly a complete reversal from May of that year. May, incidentally was when Michael Roach, CGI’s President and CEO announced the company’s intent to acquire Stanley as part of CGI’s “commitment to continue expanding our footprint in the strategic U.S. market.”