Mergers and Acquisitions this Quarter (Jan-Mar 2008)

Wednesday, 16 April 2008

ValueNotes Outsourcing DealTracker recorded total number of 45 acquisitions in this quarter, compared to 36 deals in the last quarter (Oct-Dec 2007). The largest acquisition was by AECOM Technology Corporation, which took over Earth Tech, Inc., a California-based consulting company employing 7,000 people, for $510 m. Some details of the overall acquisition scenario in this quarter are given in the table below:

Parameters	Jan-Mar 2008 (This Quarter)	Oct-Dec 2007 (Last Quarter)
Number of deals	45	36
Average value of deal	$153.1 m	$417.9 m (with the Vedior deal) $125.3 m (without the Vedior deal)
Large deals	1. Global BPO Services Corp. acquires Stream Holdings Corporation, with 16,000 employees 2. AECOM takes over Earth Tech, with 2007 revenues of $1.3 b and 7,000 employees, for $510 m. 3. CSC acquires First Consulting Group for $365 m.	1. Steria takes over Xansa for $ 961.2 m. Xansa employs 8000 people. 2. Deutsche Bank acquires Garanti's Custody Business, with employee strength of about 11,000. 3. Citi Group completes the acquisition of Automated Trading Desk for $680 m.

Source: ValueNotes Outsourcing DealTracker

Publishing BPOs get aggressive

Multi-service BPOs were involved in the largest proportion of deals (68%) in this quarter. Amongst niche segments, around 10% of the acquisitions have been in the publishing vertical. The rest of the acquisitions were spread across verticals such as pharma, real estate, healthcare, etc.

Publishing companies have been conspicuous by their varied acquisitions this quarter. The acquiring companies have targeted pre-press, printing and e-publishing and educational publishing service providers and involve cross-border acquisitions. Some of the larger acquisitions in this space are recorded below:

Acquisitions in publishing outsourcing this quarter (Jan-Mar 2008)

Acquirer	Target Company	Acquired company's services	Deal Size
OKS Group	Alden Pre-Press Services	Editorial and prepress services for the science, technical and medical publishers	NA
Macmillan Publishing Solutions (MPS)	Compset Inc	Graphics and composition service provider	NA
R.R. Donnelley & Sons Company	Pro Line Printing, Inc	Printing, binding, digital prepress and design, copywriting, direct mailing and promotions.	$122 m
PreMedia Global Inc.	GGS Book Services, a division of GGS Information Services Inc.	College and El-hi textbook production	NA

Source: ValueNotes Outsourcing DealTracker

The publishing BPOs have been experiencing an increased growth impetus in the last few years. As per a recent report "Offshoring in the Publishing Vertical" by ValueNotes, the segment is slated to grow at 35% yoy to cross $1.46 b in revenues by 2011 driven by high-value offerings and inorganic growth.

US favored over other geographies

A significant number of companies acquired are headquartered in the US. Companies in Asia (India, Philippines and China) formed the second largest group among acquired companies (16%). Also on the radar of acquiring companies were targets in the UK and Europe.

Driven by an appreciating rupee against US dollar, the US has become more favored amongst other geographies for niche acquisitions. Vendors looking to acquire high-level skills in certain areas find some of the US-based companies an excellent buy in their turbulent times. While it helps the acquiring company complement its skills lacuna in offshore delivery, the acquisition fits well with their overall strategy of global delivery and client proximity.

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