BPO Mergers and Acquisitions Sizzling, Despite Automation Hysteria

Judging from the number of BPO mergers and acquisitions this year, there is still plenty of confidence in the benefits of a “human touch” in customer service, along with increased trust in the value of sourcing CX to the experts.

Sure, RPA and automated services are gaining more traction as adoption rates increase in the sector, but they are mostly being introduced to augment agent capabilities, not replace them entirely – people are still valued as the lifeblood of customer experience, and, almost three quarters through 2018, the BPO deals are there to prove it.

Blackstone Making Moves

Most recently, American multinational private equity firm Blackstone Group announced that it was buying a US$250 million stake in TaskUs, a US startup that manages customer service for numerous companies in the United States.

This deal reportedly values TaskUs at more than US$500 million, a significant sum considering that the company had previously only raised US$15 million from Philippine private equity firm Navegar.

Headquartered in Los Angeles, TaskUs has its own centers in Texas, Mexico, and the Philippines, along with nine partner centers in El Salvador, Nicaragua, Colombia, and Guatemala. With that kind of spread, the company has had a bird’s eye view of the CX landscape around the world, where it has seen a corporate shift in the approach to sourcing.

“We’ve seen many of our businesses want to bring some work back onshore and use a hybrid approach, with more sensitive work or higher-value work done onshore and a bigger portion of tier-one work done offshore,” TaskUs CEO Bryce Maddock told Bloomberg.

Despite Blackstone’s move to acquire TaskUs, the company also sold India’s Intelenet Global Services in June for US$1 billion, which was promptly snapped up by French BPO giant Teleperformance.

“This transaction is immediately creating value for Teleperformance’s shareholders, as it should result in a positive 10% impact on earnings per share in 2018 on a pro forma basis,” said Daniel Julien, CEO of Teleperformance.

This is the second time Blackstone has sold Intelenet. The equity firm acquired it for US$260 million in 2007, sold it to British provider Serco for US$634 million in 2011, then took it back for around US$300 million in 2013.

Why Blackstone forgoed control over Intelenet yet again and opted for a stake in TaskUs is unclear, but it could be related to the fact that 40% of TaskUs’s business is image tagging or content moderation – a forward-looking service for innovative companies that rely on social media, instant messaging, and, more recently, autonomous driving.

Domino Effect

At the tail end of 2017, US private equity firm One Equity Partners purchased Latin American BPO provider OneLink for an undisclosed sum, picking up 12 delivery centers in El Salvador, Nicaragua, Colombia, and Guatemala.

Despite this being the firm’s first BPO purchase, One Equity Partners has plenty of confidence in Onelink’s future, stating that “corporations are increasingly outsourcing customer services”.

Although 2017 had its fair share of smaller mergers and acquisitions, the OneLink sale highlighted the level of US interest in Latin American BPO, leading to a string of similar deals in 2018.

In March, another US private equity firm, Capital Square Partners, merged Aegis BPO into call center service provider Startek. Along with an additional investment of US$10 million, the firm will receive a 55% stake in the combined company, with Startek shareholders controlling the remaining 45%.

Out of its global workforce of 50,000, Aegis BPO employs more than 5,500 people in Argentina within 5 delivery centers, all of which cater to US clients in banking, insurance, telecom, health, travel, and hospitality.

Another large BPO merger occurred in July, when Silicon Valley-based technology vendor Synnex purchased global BPO behemoth Convergys for US$2.4 billion – a relative bargain when you consider that Convergys reported US$2.7 billion in revenue in 2017.

Synnex was already in possession of another BPO giant, Concentrix, which it acquired in 2006. The two companies will soon be folded into one another to create one massive hybrid BPO, covering a global footprint of 40 countries servicing clients in 70 different languages.

Concentrix has been bulking up in Latin America and Caribbean since 2018 began, adding 500 more staff to Costa Rica this month and a new Montego Bay delivery center with capacity for 1,000 agents in March.

All this proves that BPO is far from entering its heyday, as some naysayers have been inaccurately communicating.

Keeping it Nearshore

Along with the continuous global interest in nearshore BPO, established players in the region are also making moves into nearby locales, leveraging the benefits they themselves have been capitalizing on for years.

At the end of 2017, Jamaica’s Itel-BPO Solutions took full control over Granada Corporation, an American bilingual customer service provider with a focus on work-at-home delivery. With this merger, Granada’s 200 people in the United States were folded into Itel’s Nearshore operations, increasing Itel’s overall business by 35%.

“We wanted to further entrench Itel-BPO as the largest indigenous player in the Caribbean, as well as becoming a truly international player,” said Yoni Epstein, CEO of Itel BPO, who is also bullish about more expansions in the region. “In terms of opportunities for French-language services, Haiti is very much open. If a client came to us tomorrow asking for French we could leverage some of our relationships in Haiti that would allow us to launch quickly.”

In another nearshore move, Dimension Data – a part of NTT Group, one of the largest telecommunications service providers in the world – purchased Canadian call center unit Millennium 1 Solutions in June, adding 2,000 employees to its BPO bowstring.

Millennium was folded into Dimension subsidiary Merchants as part of a strategy to better serve North America as a whole.

“Merchants has strengths and capabilities in telco, retail, airlines, and service desk, and the acquisition will expand Merchants’ go-to-market offerings in North America,” explained Joe Manuele, Dimension Data’s Group Executive.

Clearly the region’s improvements in English language capabilities, its cost benefits, and the time-zone alignment with the US are keeping things ticking, showing that despite the perception that automated helpers will replace human agents there is still a strong attraction to personable customer service – and that is unlikely to change anytime soon.

Even with the introduction of game-changing automated technology, BPO continues to thrive as a human-centric industry and will continue to do so, adapting to the needs of customers as the technology evolves. With the billions of dollars being pumped into the sector, it’s clear that these investors share a deep belief in BPO, so a few robots are unlikely to change that.