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Teleperformance to Acquire Intelenet, Makes Strategic Bet on India & Analytics

 

After several months of media speculation, Teleperformance officially announced yesterday an agreement to acquire Intelenet Global Services from the private equity Blackstone for a total consideration of $1bn.

Boost for Indian market

The deal will expand Teleperformance’s topline growth and have a positive impact of around +10% on the company’s earnings per share in 2018 on a pro forma basis, excluding goodwill. For the fiscal year ending March 31, 2018, Intelenet had revenues of $449m, up +10% year on year, and EBITDA of $83m.

Thirty-four percent of Intelenet’s business is in CX Services, and it will expand Teleperformance’s client base with ~110 logos in BFSI, travel, transport, and hospitality, e-commerce, telecom, and healthcare sectors in the U.S., U.K., Middle East, and India domestic. Across 40 delivery centers, the Mumbai-headquartered Intelenet has ~55k employees in India, the Philippines, U.K., U.S., the United Arab Emirates, Jordan, Poland, and Guatemala.

In the last few years, India has been one of the fastest growing destinations for Teleperformance, and the additional Intelenet footprint will create a combined workforce of ~60k in tier 1, 2, and 3 cities, with the main centers in Mumbai, Delhi, and Chennai. Intelenet will also add a sizable domestic market portfolio of ~$150m of annual revenue.

Entry into diversified BPS

Intelenet will also contribute to Teleperformance’s service diversification, bringing F&A, HRO, and industry-specific services such as mortgage origination, risk management, payment remediation in BFSI, revenue cycle management and coding in healthcare, and a variety of transaction processing services for travel and hospitality clients.

All these services will grow significantly Teleperformance’s ‘Specialized Services’ which include receivables management, TLScontact’s visa processing, LanguageLine interpretation services, acquired in 2016, and the consulting arm Praxidia, established earlier in 2018. For 2017 ‘Specialized Services’ represented ~15% or €638m of the total business.

The value-add of Intelenet Knowledge Services

The other key value-add from the transaction is Intelenet’s investment in digital capabilities. Intelenet’s Knowledge Services arm was founded in 2010 to offer standalone analytics, consulting, and technology development services. Across the different teams and primarily India-based, Intelenet has ~200 employees comprised of business analysts and consultants, researchers, project managers, graphic designers, software developers, analytics modelers, and statisticians, and increasingly ML experts.

These resources have created a stack of predictive and prescriptive analytics models and domain-specific platforms, e.g. for fare automation, loss prevention, disruption management, mobility, and workflow automation in the travel and airline space.

A €6bn business by 2022 & disruption among CX Services leaders

For Intelenet, the deal will finally land the company a strategic investor after several ownership iterations since 2000. For Teleperformance, it will firmly place it on track to reach the target of €6bn revenue and EBITDA of €850m by 2022. Teleperformance predicts the transaction will add at least 1% annual like-for-like growth and 20 bps to the margin this year.

At the same time, the impact on the CX Services market is significant, not only because of the scale of the deal, but also in the context of the pending changes in the top 10. Keeping in mind the expected sales of Convergys and Arvato CRM, it shows the increased pressure for CX Services provider consolidation to meet market demand for digital and consulting services and global delivery.

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