The merged company will have 40,000 employees in 41 countries with combined full-year 2005 revenue of more than GBP3 billion ($5.7 billion). This ranks it as the 17th largest services vendor in the world, and the seventh largest based in Europe.

LogicaCMG set out several reasons for the deal, and at the top of the list, it argued that the top end of the IT services sector is very much a scale game.

LogicaCMG said that WM-data would give it access to the Nordic IT services market – a region where it has only a limited presence itself, and one which it claims will increase investment in IT services by 6%. IT services spending in the region is forecast to reach $14.7 billion this year.

Several major international IT services firms, including Atos Origin, Capgemini and Getronics, have scaled down their operations in the region or pulled out altogether in recent years. The Nordic IT services market is one of the most competitive in Europe, with four large local players emerging from a period of widespread consolidations; WM-data in Sweden, Ementor and EDB Business Partner in Norway; and TietoEnator in Finland.

Although there is very little geographical overlap between the two companies, LogicaCMG expects to squeeze GBP15 million ($28 million) in annualized cost savings from the merged business from 2007, which will be achieved though cost-cutting measures totaling GBP22 million ($42 million) over the next two years.

From WM-data’s perspective, the deal gives it access to a large pool of low-cost offshore resources at LogicaCMG’s operations in India and Eastern Europe. WM-data and its main regional rivals are under increasing pricing pressure from India’s big software services vendors, as well as the growing influence of tier one international players such as IBM Global Services. The merger should also enable WM-data to win more business with Nordic companies with international operations.

WM-data has worked hard in the last five years to transform itself from a computer hardware reseller struggling against dwindling profit margins, into a generalist IT services supplier. The company span out its PC dealer business as a separate venture called Atea in May 2001, which was subsequently acquired by Norwegian services vendor Ementor this June.

As the company jettisoned its low-margin reselling activities, it looked to build up its higher-margin, recurring revenue services activities. It bought the Nordic IT services arm of Atos Origin in May 2005, which added an extra $200 million in annual revenue, having snapped up Finnish services company Novo Group in 2003. The company has also built up in areas such as outsourcing and payroll services, the latter also being the main area of interest for LogicaCMG’s business process outsourcing ambitions.

These changes have helped WM-data improve its bottom line performance, and in the first six months of this year, it made an operating profit margin of 7.2%, while LogicaCMG registered exactly the same level in full-year 2005, the most recent period for which it has reported numbers.

The offer values WM-data at SEK27.75 ($3.89) per share, which represents a premium of 25% over its average closing price over the last three months. The deal has already got the green light from WM-data’s two largest investors, Investor AB and company founder Thord Wilke, which own 23.2% of the firm’s share capital and 53.2% of the voting rights.

LogicaCMG will pay for around 80% of the deal in new shares, with the remaining 20% in cash. One the deal is completed, WM-data shareholders will own 26.2% in the merged business, and this dilution of shares may have been a factoring LogicaCMG’s shares falling nearly 8% on the London Stock Exchange following the deal’s announcement.

Some investment analysts also sounded notes of caution over the price tag, as well as the ability of the LogicaCMG management team to focus on integrating the acquisition when it is still in the process of fusing with the Unilog business that it acquired for E931 million ($1.2 billion) late last year.