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Mergers and Acquistions News

Categories: BPO

November 3rd 2008, 14:50PM

The business process outsourcing (BPO) acquisition sector burst into life in October after a relatively quiet year on the takeover front.

Citigroup's sale of its Indian BPO division Citigroup Global Services (CGS) for $505 million (£290 million) to Tata Consultancy Services (TCS) grabbed the majority of the headlines as the US financial giant sought to cut back on costs in the wake of the ongoing financial turmoil.

Under the acquisition deal, Citigroup agreed to provide the new TCS subsidiary with $2.5 billion worth of outsourcing over the next nine-and-a-half years.

It was reported by Finextra that TCS beat a number of other notable companies to CGS, including the likes of IBM, Firstsource and Genpact.

The takeover was announced in the same week as Nomura's acquisition of another BPO firm, previously owned Lehman Brothers.

As with the Citigroup sale, this deal also came about as a result of problems on Wall Street.

Referring to the agreements, as well as the bidding war between Infosys and HCL for Axon, BPO analyst Ed Thomas suggested that more mergers and acquisitions could be on the way for the sector in the near future.

"Contract signing might be falling off, but acquisition activity is not," he told Computing.co.uk.

"Companies clearly still have cash available and are investing it with an eye on the future."

Mr Thomas did not have long to wait before a new BPO acquisition was announced, with FTSE 100 company Capita Group unveiling its £13.6 million net cash payment deal to purchase ABS Network Solutions (ABSNet) just a week later.

Chief executive Paul Pindar claimed the organisation made the move in order to "enhance and broaden Capita's position in the network services market", with ABSNet's close relationship with VoIP services leader Cisco Systems cited as being one of the most appealing parts of the acquisition.

The other major BPO investment of the month was the announcement that PeopleSupport and Essar Services was set to merge following a vote of approval from the former's stockholders.

Shareholders representing approximately 75 per cent of PeopleSupport's ownership voted in favour of the deal, which Agarup Sengupta of Aegis BPO suggested would have an affect on the worldwide BPO market.

"This strategic combination creates a global outsourcing leader with capabilities across multiple geographies and domains," he remarked.

BPO was not the only sector experiencing acquisition activity during October.

In the UK's IT industry, Xchanging spent £83 million to purchase a 75 per cent stake in Cambridge Solutions, while bookmaker William Hill secured a new deal with leading internet gaming software provider Playtech.

Another Cambridge-based company Scientia announced that it had purchased Anglo-Swedish firm Pythagoras International and Fortune 500 firm Avent moved into the UK's semiconductor industry with a takeover of Abacus Group.

The deal was worth approximately £105 million, with £62.9 million going towards covering Abacus' net debt.ADNFCR-1833-ID-18855689-ADNFCR

 

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