Serco Makes Strategic Move, Acquiring Intelenet to Increase International Outsourcing Exposure
June 6, 2011
Although the deal is expensive, Britain’s Serco plans to acquire Indian outsourcer, Intelenet, for approximately $634 million. This will be an initiative to drive growth into overseas market that has high-growth.
Headquartered in London, Serco wants to see its entry into the rapidly growing outsourcing markets in India. These markets are speculated to grow at least 15 percent each year in the medium term. Serco recently has seen solid growth so far. In a move to seal its presence in the U.S., Serco bought Sl International for $423 million in 2008.
“The international BPO (business process outsourcing) market is growing quickly as companies seek out new ways to improve their service and reduce costs,” said Chris Hyman, CEO of Serco I, reports Reuters.
Serco is expected to reel in profits while servicing sectors like banking, insurance markets and financing in the U.K. and the U.S. It is also expected to book profits in India’s increasing domestic market. Analysts say that India’s domestic market will run up to $2.5 billion in less than three years.
Intelenet operates in seven countries, and offers services such as accounting to India’s private sector. It also has an international presence in travel, financial services, healthcare and telecom industries.
Analyst Kevin Lapwood, Seymour Pierce, wrote in a note reflecting the market perspective on the whole: This is not expected to be cheap and Serco is not expected to improve earnings until 2013. Adding, “However, it is an important strategic move for Serco since it will enhance its credibility in the higher margin BPO market and increase its international exposure,” Reuter reports.
Three years ago, Mumbai-based Intelenet posted revenues for 2008, for the quarter ending March 31, as $103 million with operating profit at $11.5 million. Most of its revenue comes from overseas BPO. In the next five years, Intelenet has a pipeline worth about $303 million.