IT solutions company Logica has confirmed that it is in merger talks with CMG, which could see the creation of an IT services company capable of challenging market leaders IBM and EDS.
In a statement Logica confirmed that merger discussions were at "an early stage".
The deal would see Logica shareholders own 60 per cent of the combined firm, with Logica's chief executive Martin Read taking the helm. CMG's chairman, Cor Stutterheim, would become non-executive chairman.
But analysts have said that, despite a good fit between the companies, a better strategy might be for both to grow their business process and IT outsourcing capabilities separately by acquisitions.
A merger would extend the geographical reach of both firms but it would not help them get into the lucrative outsourcing market, said Georgina O'Toole, analyst at Ovum Holway.
"Logica and CMG have both struggled to get themselves seen as outsourcers, and outsourcing is the place to be," she said.
According to Ovum Holway's figures, the combined company would have annual revenues in excess of £2bn, placing it just behind IBM and EDS in the UK's IT services market.
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