Solving the Value Equation
www.ephorgroup.com 1 ©Copyright 2013 Ephor Group, LLC. All Rights Reserved.
BPO Front Office
Co...
Solving the Value Equation
www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 2
BPO FINDINGS
The ov...
Solving the Value Equation
www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 3
BPO M&A Private Com...
Useful Capital Strategies for 2014
Ephor Group | www.ephorgroup.com | 24 E. Greenway Plaza Suite 404 | Houston, TX 77046
M...
` 
2014  BPO Services eNewsletter 
The old saying “You Grow or You Die” has never been more appropriate then now!
“This sl...
` 
The Future: Meier said he expects margin pressure to get increasing more difficult
especially in the North America labo...
Solving the Value Equation
www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 2
When considering ex...
Solving the Value Equation
www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 3
Copyright Notice
Ep...
Solving the Value Equation
www.ephorgroup.com 1 ©Copyright 2014 Ephor Group, LLC. All Rights Reserved.
For a no obligation...
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BPO Expansion Strategies for 2014

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Private company BPO expansion strategies for 2014 including growth capital options, M&A corporate development, and geographic and portfolio expansion.

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BPO Expansion Strategies for 2014

  1. 1. Solving the Value Equation www.ephorgroup.com 1 ©Copyright 2013 Ephor Group, LLC. All Rights Reserved. BPO Front Office Contact Center CRM Services Findings Report The front office BPO market landscape Ephor Group, LLC An Ephor Group review of the Business Process Outsourcing (BPO) capabilities for front office contact center CRM services. Q1
  2. 2. Solving the Value Equation www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 2 BPO FINDINGS The overall BPO services market is organically growing in the single digits, with a few niche segments and market leaders growing in double digits. Demand for BPO services is being driven by ROI value beyond labor arbitrage:  More employers are using outsourced services to gain access to providers with deep subject matter expertise. An acute shortage of certified, credentialed mid skill level workforce talent plus access to the best strategic professionals in the long-term  Also, complexity, regulation, and compliance are driving the need to find simpler solutions to managing their workforce operations.  Some leading BPO service vendors can provide full customer lifecycle solutions including the modernization of the customer experience (using more advanced technology including cloud, social, mobile, big data analytics, and customer analytics. The vendors with advanced service delivery model competence are growing.  Increasingly, business process as a service (BPaaS) is extending the depth and scope of services.  Rapid advances in BPO procedures using new technologies and the application of technology on productivity efficiencies.  Continued outsourcing adoption by emerging and middle market corporations. Because BPO buyers are looking for value beyond labor arbitrage, the conversations are increasingly centered around operating outcomes and buyers look to evaluate service providers more holistically. Service providers are therefore focused on creating value-added solutions that include social media channel, customer analytics, and skill development & training to drive better customer experience management. Ephor Group, founded in 2002, is a strategic advisory firm exclusively focused on growth oriented Business Process Outsourcing (BPO) corporations. Since its inception, the firm has provided outsourced corporate development services and growth capital acquisition advisory services. This set of capabilities and expertise has resulted in approximately 5,500 new jobs created over the past decade.  186 private BPO inbound/outbound providers greater than $10m (not including 41 public companies nor subsidiaries with contact center operations of holding companies).  7 private company acquisitions in 2013 (13 in 2012).  TBD Jobs Created.  Valuation multiples for scaled enterprises 2 to 4X revenue FINDINGS
  3. 3. Solving the Value Equation www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 3 BPO M&A Private Company Deal Transactions Buyer Seller Vertical Revenue Size $m Deal Terms Deal Notes CoAdvantage OdysseyOneSource HRO PEO ASO <$25 NA Jan 2013 two of the top ten PEOs in the nation Budco (Glencoe Capital) South Shore Venture Enterprises BPO CRM <$25 NA May 2013 expands our footprint in the healthcare and insurance vertical markets Allied Global LLC Marketlink Inc Inbound & Outbound BPO $75 NA Sept 2013 Together, the combined entity has 6,000 employees, 19 contact centers in 4 countries offering services in several languages. 24-7 Intouch Inc Innovative Contact Solutions (ICS) Inbound & Outbound BPO NA NA Oct 2013 The facility currently houses 240 seats and is rapidly expanding its capacity to 600+ seats by the end of the year, bringing 24-7 Intouch’s global capacity to over 2,400 contact center workstations. Enhanced Recovery Company, LLC "ERC" TMone Inbound & Outbound NA NA Sept 2013 4 facilities acquired. The acquisition positions ERC to deliver next-generation Customer Experience Management (“CEM”), providing clients with access to best in class Customer Relationship Management (“CRM”) and ARM services Etech Global Services Global Contact Services’ (GCS) Inbound & Outbound BPO NA NA May 2013 8 worldwide locations including one in Jamaica and 2 in India employing 2,5000 employees FusionBPO Simply Outbound Ltd. Inbound & Outbound NA NA May 2013 Acquired for lead generation and database space in United Kingdom *Public Company Deal Transactions: 1 2 3 4 5 6 7 M&A activity in the coming year will depend on a number of factors, including the slow growth economic conditions. Gradual improvements in economic conditions and stable debt markets should help sustain growth in the overall M&A market, although economic uncertainty will dampen global consolidations. With interest rates at historic lows and companies looking for revenue growth opportunities, acquisitions are a natural avenue to bolster market share, build out brands and fuel longer-term strategic initiatives. Uncertain economic growth means greater competition for market share, greater focus on retaining customers. 1 In 2013 SYNNEX (NYSE: SNX) acquires IBM (NYSE: IBM) BPO Customer Care for $505 million, consisting of approximately $430 million in cash and $75 million in stock. The acquisition will be branded and fully integrated with Concentrix, a wholly owned subsidiary of SYNNEX. 45,000 staff and 50 plus delivery centers focused on 12 industries across 6 continents. 2 In 2013 Innotrac Corp., a provider of outsourced e-Commerce fulfillment, business intelligence and contact center services, was acquired by Sterling Partners, a leading mid-market PE firm Sterling Partners agreed to purchase the Company for an implied EV of ~$110m (12.1x LTM EBITDA) 3 In March 2014 Global Payments Completes Acquisition of PayPros for $420 million to acquire 58,000 clients. 4 In January 2013 Aditya Birla group sold its Canada-based BPO Minacs Worldwide to a group of strategic financial investors, led by Capital Square Partners for $270 million. With 5,175 employees and revenues of $450 million and an operating profit of $40 million the deal consideration is 7x multiple to operating profit. 5 In Jan 2013 TeleTech Holdings (NASDAQ: TTEC) acquired Technology Solutions Group for $99 million. 6 In Dec 2013 iQor announced today the signing of a definitive agreement to acquire the Aftermarket Services business of Jabil Circuit, Inc. (NYSE: JBL) for $725 million. This acquisition will create the first global company with the capabilities to address the $40 billion market at the intersection of customer relationship management and product support solutions. Following completion of the transaction, iQor will have more than $1.5 billion in revenues, more than 31,000 employees and operations in 16 countries around the world 7 Convergys Completes Acquisition of Stream March 2014 for $820 million to create one of the largest firms with Convergys now has 125,000 employees working out of more than 150 locations in 31 countries, speaking 47 languages, it said in a statement.  Valuation multiples for scaled enterprises 2 to 4X revenue multiple and 8 to 12X EBITDA multiple. Private company BPO service providers with USA headquarters.
  4. 4. Useful Capital Strategies for 2014 Ephor Group | www.ephorgroup.com | 24 E. Greenway Plaza Suite 404 | Houston, TX 77046 M&A Forecast & Landscape We anticipate M&A activity to be quite robust over the next 12 to 18 months as strategic acquire distressed and low growth assets.  Mergers and acquisitions in the software, information technology and BPO services slowed in 2013 compared to the # of transactions in 2012, which rose over 2011 levels. Overall, strategic acquirers have been focusing on complementary acquisitions, with the majority of transactions less than $100M; while financial buyers such as PEGs have focused on consolidating market leaders or tuck-in acquisitions for their current portfolio companies. . Looking ahead to 2014 and 2015 M&A deals for strategics seeking complimentary assets/capabilities including a fervor focus on distressed and stagnant businesses without access to capital (those firms stuck in the growth capital liquidity trap) highlight the forecast.  There is a shortage of bank and venture capital for those companies with less than $10 million in EBITDA, but a general surplus for companies with $10 million in EBITDA or more. However, family offices and new forms of growth capital have emerged to bridge the gap.  The rising complexities and costs of doing business are causing market bifurcation and the thinning of middle market businesses. Capital options landscape:  Credit facilities will be almost exclusively asset based lending only.  Venture continues to ride the wave of “Consumerism.” The types of businesses that venture capitalists plan to invest in the next 12 months are 33% targeting information technology and another 23% planning to invest in health care or biotech. Approximately 44% of respondents plan to make new investments outside of the USA.  Mezzanine lenders remain eager to put capital to work with transaction structure and pricing relatively flexible.  Access to growth capital from PEGs (private equity groups) for branded sector market leaders only.  M&A corporate development deal valuations will be limited and capped.  The M&A outlook will remain strong, including deal count volume as cash-rich strategics augment growth and capabilities.  Strategics Seeking Growth. Conditions are good for an increase in strategic acquisitions in 2014 and 2015 as U.S. corporations have built up immense balance sheet firepower, with more than $2 trillion of aggregate cash currently earning a minimal return. Given the sluggish economic outlook, M&A can be an effective tool for lifting the top line and generating margin improvement through synergies following an extended period of cost controls.  Private Equity Financial Sponsors will be focused on selling assets due to pressure to put committed capital to work and to generate exits. Financial sponsors evaluating platform acquisitions and add-on deals continue to have in excess of $400 billion in un-invested capital that needs to be deployed as well as access to debt at reasonable terms. At the same time, achieving fully valued realizations is a high priority for private equity firms with aging portfolio companies.
  5. 5. `  2014  BPO Services eNewsletter  The old saying “You Grow or You Die” has never been more appropriate then now! “This slow growth economy, the associated anemic labor markets and the increasing government burdens, coupled with the increasing labor market and workforce management complexities will continue to challenge us, cost us, and deter us for quite some time.” Said Meier The question is what can we do? Ephor Group Founder Garry E. Meier shares some of his findings, thoughts and conclusions to solving the many challenges facing us as service side executives, including growth & growth capital strategies, based on an eight month tour of operational, business process outsourcing (BPO) and support center facilities in 13 countries in across North, Central & Latin America. Here’s the recap. Fast Stats:  The LATAM region has become a receptacle of some 120 new BPO facilities comprising approximately $350M in foreign investment in the past 3 years alone. Even with these impressive growth statistics in that region, Ephor Group has determined the total capacity utilization of BPOs in LATAM is in the lower 25% quartile, while the English speaking capacity utilization is even less. Of particular note, there exist a particular opportunity for the Healthcare Business Services BPO’s to expand and prosper in LATAM.  Payroll Services experienced less than 5% growth in sector demand in 2013 driven by an anemic job market & slow GDP growth; while Workforce Management (WFM) experienced greater than 25% Growth in sector demand driven by increased reporting, compliance & employment lifecycle requirements. This trend will continue for the near-term. Key Metric: COGS and Gross Profit Margin as a Percentage of Labor Costs, needs to be a real focus area. Don’t hire resumes first… create a more efficient and productive process… then the resumes. Key Performance Indicators: Ephor and its management teams measure the company’s business metrics at times daily, often weekly, and consistently on a monthly and quarterly bases. Our businesses are “Perform Businesses”. Meier said. “Find the top 8 to 12 key metrics that drive your business then focus the entire company on them. Get down to a unit of one-based economic systems — such as gross profit per person per hour."
  6. 6. `  The Future: Meier said he expects margin pressure to get increasing more difficult especially in the North America labor markets due to “the administration’s” increase in compliance, reporting and cost burdens. Therefore consolidation of especially “sub-scale” assets to formulate scaled assets will be mandatory for survival and wealth creation. Ephor suggest that specialized and focused BPO’s, SaaS, and cloud computing services will be areas of opportunity in the near-term. Meier concludes: “In my 38 year career I have never seen an economic cycle or time where well managed and resourced service organizations have not been successful” Additionally Meier said “Ephor clients typically acquire one, and many times two, companies per year. It’s not a roll-up strategy… it’s simply the execution of well thought out growth strategy.” Read more from Ephor Group online at www.ephorgroup.com/eresources.asp: BPO LATAM Nearshore Findings Beyond Payroll HRO Services BPO FrontOffice Contact Center CRM Services           For more information contact: Ephor Group Founder Garry E. Meier ephor[at]ephorgroup.com Speaking Topics: The Technology Oriented Business Services Environment: Growth Strategies, Growth Capital Strategies, Corporate Development Updates, M&A Activity and Sector Insights 
  7. 7. Solving the Value Equation www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 2 When considering expansion, this is what you need to know: Growth Capital Options Strategic Alternatives State Government Initiatives, Programs Local Tax Rules & Implications Corporate Development Options M&A Forecast & Valuations Forecast Financing Unit Economics Business Economic Cost Factors Industry Macroeconomic Factors Workforce Competencies Workforce Labor Supply Human Capital Supply Chain Labor Costs Market Analysis Job & Local Community Contacts For a detailed overview of your growth options, contact Ephor Solving the Value Equation ephor@ephorgroup.com 214.702.6427 24 E. Greenway Plaza, Ste. 400 Houston, TX 77046 www.ephorgroup.com What Do I Need To Know To Expand & Why?
  8. 8. Solving the Value Equation www.ephorgroup.com ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. 3 Copyright Notice Ephor reserves all copyright and intellectual property rights to the services, content, information and data in this document. The contents in the document are protected by copyright and no part or parts hereof may be modified, reproduced, stored in a retrieval system, transmitted (in any form or by any means), copied, distributed, published, displayed, broadcasted, hyperlinked, used for creating derivative works or used in any other way for commercial or public purposes without the prior written consent of Ephor. Use of Information The contents of this document are provided to you for general information only and should not be used as a recommendation or basis for making any specific investment, business or commercial decision. These pages should not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the securities, and specifically funds or any investment products, mentioned herein, or, in any jurisdiction to any person to whom it is unlawful to make such an invitation or solicitation in such jurisdiction. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. All Limited Partner commitments must be made via fund subscription agreements. You should read the subscription agreements before deciding to subscribe for units in the respective fund. A copy of the agreements can be obtained from Ephor. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. If the investment is denominated in a foreign currency, factors including but not limited to changes in exchange rates may have an adverse effect on the value, price or income of an investment. Past performance figures as well as any projection or forecast used in this document, are not necessarily indicative of future or likely performance of any investment products. The information contained in these pages is not intended to provide professional advice and should not be relied upon in that regard. It also does not have any regard to your specific investment objective, financial situation and any of your particular needs. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement. You are advised to read the Applicable Conditions governing the fund and the relevant Risk Disclosure Statement, if any, carefully before investing in any of our products. The contents of this document, including these terms and conditions, are subject to change and may be modified, deleted or replaced from time to time and at any time at the sole and absolute discretion of Ephor. Timeliness, Accuracy and Completeness of Information In particular, we assume no responsibility for or make any representations, endorsements, or warranties whatsoever in relation to the timeliness, accuracy and completeness of any services, content, information and/or data contained in this document, whether provided by us, any content providers or third parties. No Warranties While every care has been taken in preparing the contents contained in this document, such contents are provided to you “as is” and “as available” without warranty of any kind either express or implied. In particular, no warranty regarding non-infringement, security, accuracy, fitness for a particular purpose is given in conjunction with such contents. Ephor, their directors, officers, associates, agents and affiliates make no representations, endorsements or warranties of any kind about the services, content, information and/or data contained in this document.
  9. 9. Solving the Value Equation www.ephorgroup.com 1 ©Copyright 2014 Ephor Group, LLC. All Rights Reserved. For a no obligation overview of the options in your sector, contact Ephor Solving the Value Equation ephor@ephorgroup.com 214.702.6427 24 E. Greenway Plaza, Ste. 400 Houston, TX 77046 www.ephorgroup.com What Are My Best Growth Strategy Options?

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