November, 29, 2011: Mergers and Acquisition have come back to the Offshore Information technology and Business process outsourcing industry. The total transaction value stands at about USD 3.9 billion between January and October this year.
All around the year the Merger and Acquisition activity was on the rise with some big deals as well. Major companies that were involved in buyout were iGate, Genpact, and Wipro. The global service firm Serco has acquired a domestic BPO major, Intelenet. Yatra Online, Snapdeal.com, and Naaptol Online were the companies that raised fund through PE funding.
Information provided by Grant Thornton, an advisory firm suggests that acquisition related activities during the first ten months were four times higher than the previous year in terms of value and is recorded to be the highest after 2006. Different companies had announced 175 deals this year alone, while it was 118 in 2010 and 78 in 2009.
According to Nasscom, IT and BPO companies are looking to add domain expertise as they are getting involved in more value added work. Building domain expertise will not happen just through hiring and this has prompted companies to go for Merger and Acquisitions. He added that the reasonable valuation has created a better environment for M&A activities.
The Grant Thornton data suggests that the Merger & Acquisition deals which amounted to USD 3.2 billion were announced during the first ten months of 2011. During the same period PE deals of USD 657 million was recorded. This sums to USD 3.9 billion as a result of M&A and/or PE deals for the period from January to October, 2011, while it was USD 887 million in 2010 and USD 797 million in 2009. The highest of the M&A and/or PE deals was recorded during January to October, 2006 and was worth USD 4.2 billion.
The first wave of these activities were marked by major IT companies acquiring BPO companies, where as the second wave was characterized by overseas players improving their offshore capability. The third wave saw the monetization of captive units.
Now the industry is passing through the fourth wave of M&A deals. In the fourth wave stand alone BPO companies want to be full service BPO service providers, while IT players want to ensure full services by acquiring niche capabilities. This shows that everyone want make their foot print in the markets across the globe.