Serco is to acquire Intelenet, a leading provider of business process outsourcing (BPO) services to the private sector around the world and in the domestic Indian market. The investment is for a consideration of £385 million.
From operations in 34 global delivery centres across seven countries, Intelenet provides a broad range of middle and back office services and has a strong customer base of international organizations, predominantly across the financial services, travel, healthcare and telecom sectors.
This acquisition is in line with Serco’s strategy which is focused on driving organic growth, supplemented by strategic acquisitions of skills and capabilities to enter new markets and sectors where it sees strong opportunities to enhance its growth and margins.
Serco expects the acquisition to provide access to attractive markets. The international and domestic Indian BPO markets are large, forecast to grow around 15% per annum in the medium term, and have margins reflective of high value services, said Serco.
The move also broadens the company’s customer and geographic reach. In line with Serco’s strategy of building a balanced portfolio, Intelenet’s diverse and international private sector customer base will further increase the company’s spread across markets.
Serco said the investment adds scale and depth to its capabilities. Together with the company’s existing BPO-related operations, Serco will have around 40,000 employees providing transactional, process and voice support, finance and accounting services, and business transformation consulting, making it strongly placed to provide its customers with a broad range of end-to-end business services.
The total acquisition cost of up to £385 million includes contingent payments of up to £50 million, and will be fully funded from Serco’s debt facilities. For the year to 31 March 2011, Intelenet’s revenue was approximately £170 million and adjusted operating profit was £19 million.
Intelenet is expected to continue achieving organic annual revenue growth of 10% to 15% and to maintain its Adjusted operating profit margin, before net cost synergies, at around 12%. The acquisition is expected to be accretive to earnings in the first full year with returns meeting Serco’s cost of capital in the third full year of ownership.
However, it is still subject to regulatory approval, which is expected in the coming months.
Chris Hyman, Chief Executive of Serco, said the acquisition of Intelenet supports Serco’s ambitions as a leading global service company. Intelenet’s high value capabilities and customer base, together with its economies of scale, means Serco can access new markets and strengthen its existing propositions, said Hyman.
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