Serial Acquirer

Deep Dive: Reply SpA (REY, REY.MI)

Italian IT-services serial acquirer with unique organizational model and culture

Gorilla Game

13 Apr 2025 — 44 min read

Reply HQ

Please read my Deep Dive: IT Services Primer before reading the Reply initiation. As you may recall from the primer, Reply stood out as having $24k in EBITDA/head, approximately double vertically integrated peers Accenture, near-shore players like EPAM and Globant and offshore Indian players like Tata and Cognizant. Reply’s EBITDA/head performance isn’t unique. Many onshore consultants specialized in high-end digital technologies generate comparable or better performance. Kainos, a UK onshore consultant focused on Workday generates $30k/head. Wavestone, a French onshore consultant focused on digital transformation generates $22k. Finally, Hackett Group, a US onshore consultant focused on consulting related to AI is even higher at $36/head.

However, Reply does have one very unique attribute. While everyone’s strategy is focused on growing headcount, revenue/head, revenue/client or reducing SG&A/head, Reply operates along a very different vector. Reply is growing the total number of boutiques. All of the aforementioned peers are effectively 1-boutique businesses whereas Reply has gone from 6 boutiques in 1996 to 230 boutiques today (14% cagr). In other words, the vector of compounding is different and while this isn’t the fastest way to grow, it is the most durable, anti-fragile, and sustainable way to grow, which is why Reply is unique.

Founded in 1996, Reply is an Italian IT-services company based in Turin with 15k staff focused on consulting. systems integration and digital communications. Revenue breakdown is Italy (55%), Germany (20%), UK (15%) and US (10%). Reply has a unique operating model where it organizes itself as a decentralized collection of 230 autonomous boutiques (€10m average revenue) each focused on a niche. Reply’s model allows it to benefit from the advantages of an agile technology-forward boutique whilst also benefiting from the diversification of a larger company. Reply's model has proven scalable and well-suited to a serial acquisition strategy with Reply having redeployed 50% of FCF back into M&A over the last decade. Reply has done c.50 acquisition since inception.

Over the last 15 years, Reply has grown revenue 14% (4% M&A, 10% organic), EBIT 16% and EPS 18% cagr and shares have compounded 28.6% dividends reinvested. Reply has achieved this growth without being reliant on a low-cost workforce or riding a specific vendor or technology wave, proving the inherent value Reply creates. Rather, Reply has been highly diversified by end-market, vendor, technology, customer, etc. Given Reply plays in a massive $1.3tn TAM, Reply has a long runway to continue replicating this success for the foreseeable future. Over the last 10 years, Reply’s shares have compounded 22.8% cagr outperforming peers including Globant (18.8%), Accenture (14.4%) and EPAM (10.4%). In this report, I'll explain why.