Teleperformance, a global leader in the Customer Experience Management (CXM) industry, has announced its proposal to acquire Majorel, another large rival in the industry. This move is set to reinforce Teleperformance’s position as a dominant force in the market and expand its reach even further. With both companies known for their excellence in CXM services, this acquisition has the potential to deliver an even greater level of innovation to clients worldwide. Read on for more details on the impact of this deal on the CXM industry.
While there is increasing appreciation for the strategic impact to businesses of delivering great customer experiences, a large part of the market is still managing Customer Experience (CX) as it has always done, which is to drive down costs and focus on operational efficiencies. Consequently, Customer Experience Management (CXM) provider margins tend to be lower than in other Business Process Services (BPS) segments, and it is not surprising that in the current uncertain economic environment, providers are focusing on tried and tested strategies such as consolidation to deliver on growth objectives.
Teleperformance further augments its leadership position by scale
The latest in the wave of mergers and acquisitions (M&A) in the CXM industry is the largest CXM services provider, Teleperformance, announcing its intention to acquire Majorel, another sizable competitor, for a total consideration of €3bn. Subject to regulatory approvals, the combined entity will result in revenues of more than €10.2bn and EBITDA of more than €2.2bn if it closes as expected between Q4 2023 and Q1 2024, resulting in Teleperformance achieving its 2025 revenue goal of €10bn two years in advance. The merged entity will be the largest CXM provider both in terms of revenues and FTEs, with nearly half a million employees worldwide.
With Concentrix’s recent announcement to acquire Webhelp, these two CXM behemoths will be more than twice the size of their next largest competitor, Foundever, which itself resulted from a merger of two significant entities (SYKES and Sitel Group). Given their global reach and ability to cater to almost all regions and languages, they will naturally be in consideration by any global buyer of these services that is looking to consolidate its provider portfolio and work with fewer but more strategic partners.
What this means for the CXM and BPS industry
As we have mentioned in our recent blog, we are seeing the rise of global Titans in the CXM industry. While this might mean less choice in service providers or strategic transformation partners for global buyers, it will also lead to cost synergies, operational efficiencies, and enhanced digital capabilities. Adding more scale allows these providers to make more concerted investments in a space which is already seeing the entry of Big Tech and hyperscalers such as Microsoft and Google into CX technology. A greater focus on innovation by these Titans will result in better products, solutions, and services in the industry.
The global outsourced CX market is a highly fragmented one, with the 10 largest providers holding a total of ~30% share of the $100 billion+ market and hundreds if not thousands of other providers making up the remaining 70%. In addition, our estimates put penetration of this market between 30-35%, indicating significant room for growth in the future. Therefore, smaller providers can continue to thrive if they are successfully able to articulate and deliver upon differentiated value propositions such as offering superior products and services, aligning more attentively to their clients’ needs, or specializing in niche areas, whether that is in a particular industry, region, buyer size, or service line.
Within the broader BPS environment, the combined entity of Teleperformance and Majorel will have a stronger Trust and Safety (T&S) portfolio and will become one of the top three T&S providers (with Accenture and TELUS International) in terms of revenues. This, along with deep digital CX expertise, Teleperformance’s recruitment process outsourcing and finance & accounting services, and Majorel’s vertical BPO solutions in banking, insurance, and retail industries, make the new entity a force to be reckoned with in the BPS world, becoming one of the top three providers by revenues in BPS. However, it will continue to remain a CXM specialist primarily as more than 80% of its revenues will be CXM-oriented, at least for now. It will be interesting to see if the combined entity will accelerate the growth of its non-CXM revenues to become known as a broader-based BPS provider in the future.
What to expect going forward
Recent economic headwinds have provided an excellent opportunity for M&A in this market as valuations are once again becoming attractive for a lot of providers. With an enormous push towards digital CX capabilities, service providers are looking aggressively to plug capability gaps, and firms that can help them achieve these objectives are becoming hot acquisition targets. We expect further M&A activity in the next 12-18 months, both big (scale-focused) and small (capability-focused).
However, it will be a mistake for providers to allow M&A and, subsequently, integration activity to distract them from focusing on how generative AI such as ChatGPT can be applied in the contact center environment. This disruptive technology is already showing great promise and has the potential to level the playing field between big and small providers if leveraged responsibly. Despite believing strongly that there will always be a need for human interaction and involvement within CXM, the contact center of today should be quite different from the contact center of the near future, as early as two years from now.
To discuss global customer experience management topics, contact Shirley Hung [email protected], Sharang Sharma [email protected], or Aishwarya Barjatya [email protected].
You can access our CXM research coverage and also attend our LinkedIn Live session, Delivering CXM Services From Africa: Who, Where, Why, And How to learn why Africa has become an ideal option for global customer experience management.
