Is Healthcare Acquisitions Next Big Outsourcing Avenue in the US?

ObamaHealthCare. Image source http://www.marketoracle.co.uk/images/ObamaHealthCare.jpg

The introduction of Obamacare is opening up new avenues for outsourcing companies like EXL Services. The company is targeting the healthcare acquisitions arena in the United States even before the market is ready for its services, an attestation to the competitive nature of the outsourcing field itself.

Only three Indian BPO providers have been listed on the US Stock Exchange so far, EXL services is one of the three companies alongside WNS Global Services and Genpact. Obamacare, when it crosses the current budget hurdles will provide health insurance for every American citizen. The law will then exponentially increase the amount of paper work every insurance company will have to process. The insurance companies in providing affordable healthcare will also look towards outsourcing as a means to cut costs.

EXL’s hefty deals and  plans to conquer the US healthcare

EXL Services has cash balances in excess of $100 million and the company has the approval to borrow a further $200 million according to the CEO and Vice-Chairman of the company, Rohit Kapoor. He is also the company’s largest individual shareholder with a 6% stake in the company valued at $950 million according to NASDAQ.

Kapoor was quoted as saying, “We are now looking at acquisitions that are not so much India-centric, such as in the US, where there are some interesting deals in the healthcare space.”

The contribution of the healthcare avenue to the total revenue of the company is expected to double. The current 10% contribution of healthcare is expected to escalate to nearly 20% in the following 3 to 4 years. This escalation is attributed to the increasing demand for services and also a direct contribution of the Obamacare initiative.

Acquisitions galore

Within the company’s books, data analytics and healthcare are the biggest deals and the fastest growing avenues of business. The annual revenue of the company was reported to be $443 million in the year 2012.

These acquisitions have accumulated in the recent past. Till the year 2007, EXL Services believed in a cautious and conservative approach. The company chose to make “safe” deals or deals that were not too expensive.

Post 2007, however, the company made one major deal every year. The largest acquisition that the company successfully completed till the current date was with the Outsource Partners International. The deal was valued at about $90 million and was executed in the year 2011.

Shyan Mukherjee, Practice Director at the Everest Group was quoted as saying, “Given (sic) healthcare is a highly regulated industry, companies have been cautious with offshoring. What’s been offshored so far is mostly claims management. But, there are a number of areas where significant offshoring is possible. Indian companies are therefore looking to build local capabilities in the US.”




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