Industry Commentary

Outsourcers Must be Decisive in Current Consolidation Climate

By January 16, 2019July 25th, 2023No Comments

As outsourcing business picks up in 2019, there is little doubt that one of the main topics in customer service management concerns consolidation – effectively, which players are looking to buy and what providers are aiming to be purchased.  This has been a dynamic long in the making, carrying over from furtive M&A activity in front office BPO over the past year.  If the discussions that ignited the current calendar year are any indication, there is every reason to believe that 2019 will be even more active than 2018.  That said, time is not on the side of prospective buyers, and putting off acquisitions will favor only those firms that are more decisive.

2018 was truly a banner year for buying in the front office BPO sector, kicking off with Jamaican-based itelbpo buying out Granada Corporation.  Multiple other deals followed, including Merchants’ acquisition of Millenium 1 in the summer, and StarTek’s fusion with Aegis.  2018’s two most notable consolidation moves included Teleperformance’s purchase of Intelenet and Concentrix’s acquisition of Convergys.  This was in addition to more targeted deals such as Sykes’ decision to purchase automation / AI specialist  Symphony.  The question many are now asking is how this activity will unfold as 2019 unfolds.

And that question should be top of mind for any outsourcing executive that is looking to grow their firm’s footprint through strategic buying.  The amount of discussions that are taking place in all corners of the globe in regard to how best to acquire in the current marketplace are voluminous, and being perfectly practical, those that procrastinate in the current market will find themselves remorseful if they do nothing.

Equally important for front office BPOs eager to buy is the available stock of prospective purchases.  While there are many solid outsourcing companies with an interest in being bought that would almost certainly entertain discussions, these are fewer today than they were two years ago.  Outsourcers pondering a buy should consider: If the current frenetic acquisition pace continues over the course of 2019, what will be left? Firms still on the market by 2020 will perhaps not offer the right functional / technological specialization, vertical mix or geographic footprint.

This is not to say that front office BPOs should feel pressured into buying competitors for the sake of it.  Any acquisition needs to be well thought out, in order to ensure that the end result will be a good commercial fit.  However, it is also very clear that there are delineated lines between outsourcers that are kicking the tires about growing though a buying approach and those that are actually stepping up to the plate by doing so.

In reality, the decision to acquire capacity, and then execute on buying the right target need not be a laborious process. Outsourcers need to be swift and decisive if they are interested in purchasing one or more of their competitors.  The market of quality buying targets is finite, and the executives of takeover targets are aware of this.  Those firms that sit on the fence will find that in a year’s time, what may be available is more expensive and less of a good fit than what they hoped for. Decisive acquisition this year can prevent 2020 from being the year of hindsight.