Serco Group plc, a U.K.-based international services company with diverse interests in both the public and private sectors, yesterday signed an agreement to acquire Intelenet, a leading Indian BPO services company serving clients around the world and in the domestic Indian market, for up to £385 million (~US$635 million.)
This is the fourth big-ticket acquisition so far this year in the Indian ITes industry, following on the heels of iGATE-Patni, Genpact-Headstrong, and most recently EXL-OPI. I see two key forces driving this acquisition spree. First, and more relevant, is the need for service providers to expand scale and capabilities in an increasingly competitive market. Second is the potential attempt by private equity investors to exit their stakes in Indian ITes companies now that the valuations are attractive with the market bouncing back from the recession.
Serco’s acquisition of Intelenet is an outcome of both these factors in play simultaneously. On one hand, this move will add to Serco BPO’s scale and depth of capabilities, and provide access to attractive markets; and on the other hand, this marks a successful exit for Blackstone, which four years ago invested ~US$200 million to stage a management buy-out of Intelenet.
Interestingly, Serco’s entry into the Indian BPO market was through its acquisition of InfoVision towards the end of 2008, whereby it established Serco BPO. The acquisition of Intelenet marks a significant step change in its global capability and capacity in terms of:
- Access to attractive markets –Intelenet has a strong customer base in the international markets and is a leader in the fast emerging domestic Indian BPO market. These markets are expected to grow at ~15 percent and ~20-25 percent per year, respectively. That a U.K.-based company has acquired BPO assets in India to target not only the international but also the domestic market underscores the growing importance of the domestic Indian BPO market. India has seen GDP increase by 7-8 percent per year over the last decade, with rising incomes driving demand from customers for services and increasing use of third parties to deliver them. In addition to this growth in the commercial BPO market, there is also emerging demand for process outsourcing within the Indian public services market.
- Added scale and depth of capabilities – The combined BPO-related operations will have 40,000 employees (~32,000 coming from Intelenet) providing services across seven countries. While Serco BPO was previously a pure customer-centric BPO provider specializing in CRM support, the acquisition brings a wealth of expertise in a broad range of middle- and back-office services, including transactional, finance and accounting, and business transformation offerings. Serco will also benefit from Intelenet’s capabilities in the financial services, travel, and healthcare industries.
Intelenet’s scale and expertise, backed by Serco Group’s financial muscle, should create a formidable player in the third-party BPO space.
On a witty note, the year 2011 adds up to the number 4 (2+0+1+1=4) and we have already seen four major acquisitions this year. Will 2011 create history via more acquisitions, or will numerology play a spoilsport? Any guesses?