Over the last two years, large Indian BPOs such as TCS, Genpact, and WNS have been on an acquisition spree in a bid to widen their scope of services and geographical locations. Most of these acquisitions of US-based companies are primarily intended to strengthen their marketing front-end and provide them easier access to newer markets and geographies.

In June 2006, Aditya Birla owned Transworks acquired Canada-based BPO Minacs Worldwide for $125 million. This week, a Pune-based BPO, HOV Services (NSE: HOVS) acquired US-based Lason for $148 million. While there have been relatively smaller cross-border acquisitions by Indian vendors in the past, these two acquisitions stand out primarily because of the size of the deal. Both the companies, Transworks and HOV Services acquired companies almost 8 to 10 times their size.

A closer look at the deals

Both the above deals bring large benefits in terms of manpower strength and clients to the respective parties. However, the rationale and strategies of the two acquirers, Transworks and HOV Services are notably different:

• Lason has a large offshore presence. With this acquisition, HOV Services will gain a strong offshore capacity as well as onshore presence, with its headcount touching 12,000.
• Minacs has a large presence in Canada. The acquisition reflects Transworks' strategy to gain a strong near-shore presence and penetrate the US and Canadian market. In fact, Transworks already has a Canadian presence, which is further strengthened by the acquisition of Minacs.

Going global…

Indian vendors are aggressively working to minimize their over-dependence on India, as well as build a strong global front-end. The trend towards rapid creation of delivery and marketing capacity across the world will ensure that Indian providers become more competitive with the global majors.

This globalization of Indian vendor capabilities will accelerate the trend of cross-border M&As. Further, this trend also highlights the growing strength of the Indian vendors: driven by the cash to shop for acquisitions around the world.

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