Industry Commentary

Front-Office BPO Consolidation Leaves Little Margin for Buying Errors

By July 30, 2018December 14th, 2022No Comments

Francis Ford Coppola’s epic film The Godfather is a trove of great scenes, and one is especially applicable in the current consolidation-driven contact center services market. As Michael Corleone and Peter Clemenza discussed, there’s a shakeout among families every five to ten years. To draw a loose parallel between cinema and reality, in front office BPO, a competitive shakeout is happening now.  The ongoing leveling of the proverbial playing field has been furious over the past year, and it promises to be equally intense in the coming months.  Players in this space must decide quickly if they wish to be bought, and if so, they need to position themselves accordingly.  For those interested in doing the buying, time is of the essence — but hasty acquisitions must be tempered with strategic planning.

The litany of contact center outsourcing acquisitions over the past several months has been impressive, and is likely unparalleled historically in the sector’s history, in terms of volume and size of deals made.  These have ranged from the coming together of emerging firms, such as itelbpo’s purchase of Granada Corporation, through to the recent announcements of Teleperformance’s buyout of Intelenet and Concentrix’s pick up of Convergys.  These are but a few examples of such activity and are likely precursors to further acquisitions in 2018 and next year.  But, regardless of what is motivating outsourcing executives to conclude that they need to make new acquisitions, thinking through what constitutes good strategic purchase should not be lost in the weeds.

First and foremost, contact center service providers on the prowl for acquisitions should deliberate what such a deal will bring.  Currently many executives are starting to scramble, as they feel pressure to launch buy-outs in order to keep up with their competitors.  But before executives get ahead of themselves, weighing a few simple questions will help clarify intentions.

Outsourcers just coming to the game should ask themselves why they need to make a buy. This is a logical first point of interrogation.  Will it be to grow scale and topline revenue? Or, is the goal more motivated toward functionality / technology, which will bring more profitability?  Perhaps it is for geographic expansion, either into a new demand or delivery location?  For many executives, the possibility of acquiring their way into new verticals is a strong motivator.  Each of these points could be valid rationale given the current commercial atmosphere, but outsourcers need to define their strategic intentions before going into the market.

For the BPOs that have found a good buying target, many of the same questions should still be asked, but in the context of what the prospective purchase will bring to the table.  Equally, the issue of vertical and geographic overlap between the acquirer and the acquired needs to be examined closely. While it is an obvious move to consolidate a competitive position, it is also imperative to make certain that a buy will not result in overconcentration.

Meanwhile, for outsourcers looking to be purchased, there is truly no time like the present.  In the existing market, it is certain that a premium can be achieved for quality players that are able to provide a strong list of clients, diversified delivery points, and a track record of driving solid outcomes for consumers.  Buyers should watch this space carefully, as such players are not likely to stay on the market very long. The shakeout  is underway, and it promises high drama — opportunity and risks abound.