On 11 July, SYNNEX Corporation, the $13.3bn parent company of Concentrix announced the acquisition of Minacs for $420m in the latest in a series of M&A deals to cause a shake-up of the global Customer Management Services (CMS) top 10 outsourcing vendors.
The combined Concentrix/Minacs subsidiary will have over $1.8bn revenues (NelsonHall estimate), placing it on a par with Alorica (which expanded last month with the acquisition of EGS) and above the $1.7bn Sitel (boosted by the French Acticall takeover in 2015) and the LATAM leader Atento. The global CMS leaders by revenue remain Teleperformance ($3.7bn) and Convergys ($2.9bn), which also expanded this month through M&A in Germany.
Concentrix and Minacs: Expanding wide, expanding deep
The acquisition brings ~ $400m of revenue and $0.53 per share non-GAAP earnings. Minacs adds to Concentrix ~ 21k employees, 15k seats and 35 centers in Canada, U.S., India, LATAM, Europe, and the Philippines.
The Minacs sale has been in the works for a while, put on the market by its owners, an investor group led by CX Partners (CXP) and Capital Square Partners (CSP), which acquired the company for ~$260m in 2014 from Indian Aditya Birla group.
The Toronto, Detroit, and Bangalore headquartered Minacs adds delivery scale to the 70k employees, 90+ centers, and 25 countries of Concentrix, with greater capabilities in Canada, nearshore U.S. and LATAM from Mexico, Jamaica, Dominican Republic, and India. In India, both companies have centers in Tier 1, Tier 2 and even Tier 3 Indian cities, though Minacs has a predominantly domestic focus for its operations.
Concentrix gains a wider client portfolio in telecoms and media, high tech and BFSI. The new and key domain strength is in automotive, where Minacs has historical experience and long-term clients from among the largest global automotive companies. Particular interest here is Minacs' expertise in the fast-growing telematics and IoT markets, where the company has experience, tools and partnerships.
Concentrix will also benefit from Minacs' marketing practice, again with strong focus on automotive, where the company has created content for, analysed, and supported marketing, sales and recall campaigns.
Probably the most intriguing new capability for Concentrix is Minacs' cloud based ecosystem of in-house and third-party tools, resources and customer experience management frameworks called ALT CRM. ALT CRM is focused on bringing automation and analytics to customer care and marketing functions.
The acquisition is expected to close by Q3, 2016 and will see Minacs' CEO, Anil Bhalla stay with the combined company and join Concentrix' senior management team.
Customer Management Services M&A in 2016 (so far): A fast track to the Top 10
M&A activity in the CMS outsourcing market so far this year has caused significant shifts in the global top ten, but it has also highlighted a more competitive environment, where organic growth has mostly stabilized at 6-8% annually. Consolidation is picking up, and smaller vendors are finding it hard to compete on investments in technology and innovation.
To date, some of the notable deals in the contact center outsourcing space include:
Sykes acquiring U.S. lead generation, inbound sales and marketing company Clearlink for $207m to expand its sales capabilities
Alorica acquiring Expert Global Solutions (EGS) for an undisclosed amount to reach No3 globally and expand in the U.S. and the healthcare vertical
Capita acquiring German BPO firm 3C DIALOG to continue its growth in the CMS market
Spanish Konecta acquiring Contax' non-Brazilian CMS business Allus for $192m, challenging Atento in LATAM
Webhelp reaching $1bn revenue with its latest acquisitions in Europe – GoExcellent in the Nordics ($90m revenues) and a niche call center in the Netherlands
Convergys' announcement that it is to acquire German vendor buw for $135m, increasing its German footprint substantially.
On the back of these deals, there are a number of smaller contact center transactions covering major geographies in LATAM (e.g. CGS, Konecta, Knoah Solutions), U.S. (e.g. Qualfon), Europe (e.g. Tessi, transcosmos) and APAC (transcosmos), as well as investor funding by PE, including:
Telus International selling a 35% share for $468m to Baring Asia
Carlyle Group acquiring a majority stake in Italian Comdata
Konecta selling 40% stake to PAI Partners
KKR and management buying Webhelp.
All of these involve pure play contact center outsourcers; there are also big changes happening with the multi-service line vendors such as Xerox and HPE.
Why buy seats if automation is coming?
It seems reasonable to question the wisdom of all this frenzied acquisition of agents and contact center seats, given the promise of automation.
However, while automation and robots are changing the contact center, they by no means threaten its existence. The increased M&A activity in 2016 indicates CMS vendors looking to build or enhance geographic presence, add new verticals, or acquire analytics or consulting capabilities.
The low skilled, high volume tasks that used to typify the work of contact center agents are being substituted by longer, more complex, and higher value customer interactions which, for business planning purposes, is enough to justify multi-million dollar acquisitions of agents and contact center seats. For the foreseeable future, CMS will remain a human-led, automation/AI supported, business.