Nearshore Americas

Convergys Swallows Stream in History-Making Nearshore Merger

Convergys has agreed to acquire Stream Global Services for $820 million, creating one of the largest call center focused operators in the region, and making history as perhaps the biggest merger of its kind in Latin America.

The deal, which Convergys expects to be closed in the first quarter of 2014, will enable the Cincinnati, Ohio-based firm to capitalize on Stream’s local-language customer care services in Latin America and Europe.

Convergys is purchasing Stream from a group of equity partners  (Ares Management and Providence Equity Partners and Ayala Corp) that took control of the BPO firm after it went private in 2012.

“This deal positions Convergys as one of the biggest BPO firms in Latin America and widens its potential to grow further in the region,” Peter Ryan, lead analyst with research firm Ovum, told Nearshore Americas. “Stream has recently been making headway into Central America, expanding rapidly in countries like El Salvador. Convergys, with a right business strategy, can cash in on Stream’s infrastructure and multi-language services, in particular.”

Convergys clearly gains a stronger footprint in Central America as a result, and puts the company directly behind Teleperformance as second largest call-center oriented operator in the region.

Based in Eagan, Minnesota, Stream has 40,000 employees globally and provides customer relationship management services in 22 countries and 35 languages. Its clients include Hewlett-Packard, Microsoft Corp, Dell Inc, Inc  and Western Digital Corp.

Stream has a significant presence in several Latin American countries including Nicaragua, Honduras, the Dominican Republic and El Salvador. It has been expanding rapidly in the latter country since exiting Costa Rica in 2012, citing high labor costs and a shortage in English-speaking labor.

The BPO provider reported that its operation in the Americas generated $70 million and $215 million respectively in the three and nine months that ended September 30, 2013, compared to $70 million and $203 million for the same periods in 2012.

Following the acquisition, Convergys says it wants to integrate Stream’s delivery capacity, breadth of languages and service capabilities.  The merger will create the world’s second biggest customer service firm — worth some $3 billion according to Ryan — with Convergys set to serve clients in 35 languages from over 135 contact centers in 25 countries.

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To complete the transaction, Convergys says it has $400 million of cash in hand and has secured another $350 million in loans from Citigroup and BofA Merrill Lynch. It did not disclose where the remaining  $70 million will come from.

Convergys runs several contact centers in Brazil, Mexico, Colombia and Costa Rica. In October 2013, it launched a call center in the Costa Rican capital of San Jose, adding 250 new positions in the country where it already employed more than 2,500 people.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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