French BPO, US IT gaint Convergys enter race to acquire Intelenet

MUMBAI: Paris-based Teleperformance and American IT services giant Convergys are competing with bulge bracket buyout funds including Baring Private Equity (Asia), CVC Capital Partners and Bain Capital to acquire outsourcing firm Intelenet, owned by Backstone Group for over $1 billion, said multiple people directly associated.

These potential suitors have been shortlisted after the initial non-binding bids were made last month. All five are currently conducting due diligence. Once completed, this could be the biggest success for the world’s largest PE fund in its 13-year old India portfolio with a 55-60% internal rate of return in dollar terms.

The average net IRR of Indian private equity firms wecre around 14.7 %, according to data compiled by Preqin, a UK-based industry tracker.

Blackstone, which bought back Intelenet in 2013 from UK’s Serco Group for £250 million (Rs 2,558 crore or $385 million), has mandated JP Morgan to run a formal process to sell the company. Blackstone had then edged past CVC Capital Partners with their offer that included a gross consideration of £220 million in cash and a £30 million in loan note. The loan accruing annual interests of 7%, had to be paid to the Serco Group. CVC is believed to be a strong contender along with the French strategic.

Blackstone is expecting at least 12 times Intelenet’s FY18 EBITDA of $90 million which means a valuation of $1.08 billion.

When contacted Blackstone denied any such developments saying the information is inaccurate.

CVC, Bain, Baring Asia, Convergys and Teleperformance did not respond to mails seeking comments.

ET reported on October 17, 2017 that Intelenet is weighing options to provide an exit for Blackstone, though no clear-cut plans were decided and on March 8, ET reported that firms like Bain and Convergys have been reached out for a potential transaction. Though the BPO has no immediate need to provide an exit to its private equity owner, the company has begun to weigh its options, its executive chairman Susir Kumar Mangalore told ET in October.

The back office provider currently employs 55,000 people in the Americas, UK, Europe, Middle East, India and the Philippines.

It had plans to double its revenues to $1billion by 2020 through acquisitions in digital technologies and on the back of deals from Blackstone’s portfolio companies.

India’s business process management (BPM) industry has globalised — particularly in the US in the past five years — and grown, albeit slower without bumping up its headcount. Revenue per head for India’s BPM industry has improved from $15,622 in FY08 to $23,569 in FY18.

“The outlook that is emerging is very positive. The technology spend projections have all been revised upward. While all of these are largely positive, there are some challenges starting like the US tax reform, delayed growth in the BFSI segment in the US,” said R Chandrasekhar, president, Nasscom, adding that the broader economic upswing is translating into business opportunities for the sector, but with a lag.