Cognizant Makes Digital Agency Acquisition In Wake Of Elliott Management Activist Offensive

Cognizant Tuesday fired back at the Elliott Management activist offensive by entering into a definitive agreement to acquire Mirabeau BV, a digital marketing agency that does business in the Netherlands and across Europe.

The acquisition strikes at one of the main criticisms of the Elliott Management bid - namely that Cognizant has been slow to use cash to strengthen its digital footprint.

[Related: 10 Things You Need To Know About Elliott Management's Activist Bid Against Cognizant]

Cognizant said the acquisition expands its digital business capabilities in the Netherlands and across Europe. The terms of the transaction were not disclosed.

Once the deal closes 260 specialists from Mirabeau, which specializes in travel, financial services, retail and business to business, will become a part of Cognizant's Digital Business practice.

"The future of the digital economy will be built on experiences consumers have as they bank, stay healthy, insure their families, and move through the interconnected world. Companies in consumer-facing sectors are increasing their investments in interactive solutions to provide better, more personalized experiences to their customers," said Santosh Thomas, President, Global Growth Markets, Cognizant in a prepared statement. "To help our clients drive growth, Cognizant Digital Business links social science research, digital strategy services, design thinking, marketing services, analytics, IoT products and services, cloud applications, and interactive content management. Mirabeau further strengthens our ability to work with clients to identify important insights, develop strategies, and then design, prototype, and scale meaningful product and service experiences."

The acquisition comes just one day after Elliott Management called for $13.5 billion solution provider behemoth to shake up its board of directors and buy back $2.5 billion in shares as part of what it called a value enhancement plan aimed at driving shares up from 50 to 69 percent.

The activist offensive is spearheaded by Elliott Management senior portfoilio manager Jesse Cohn, who has successfully brought high profile activist actions against a wide range of technology companies including Citrix Systems, Riverbed Technologies and BMC Software.

In a 16-page letter to the Cognizant board of directors, Cohn said the company's "lack of operating leverage" is "impairing" the ability for the solution provider to make "sound investments" in mergers and acqusitions (M&A).

Elliott, in fact, is pressing for Cognizant to use 25 percent of annual US free cash flow as well as $1 billion in foreign cash to make acquisitions.

Since 2014, Cognizant has made just eight acquisitions compared to 45 by rival Accenture which has moved to aggressively expand its cloud services footprintIn an analysis comparing Cognizant to Accenture, Cohn said Accenture has positioned itself "astutely at the forefront of digital services through a continued emphasis on acquisitions."

.Elliott Management said its Value Enhancement Plan provides "ample firepower for continued acquisitions" by Cognizant.

In fact, Elliott Management Value Enhancement plans allows "for a steady pace of 14 attractive tuck-in acquisitions" that it maintained will be better received by shareholders with a "consistent capital return program."