IBM Daksh Sold to Synnex’ BPO Arm

Fremont, a California-based Synnex Corporation has recently acquired IBM's worldwide customer care business process outsourcing services business, IBM Daksh for $505 mn and merged it with their global business services division, Concentrix catapulting it to the largest business processing outsourcing employer in India and among the top five in the world. The deal will consist of approximately $430 mn in cash and $75 mn in stock. The acquisition will be branded and fully integrated with Concentrix, a wholly owned subsidiary of Synnex. The firm recently added a new facility in Gurgaon.

As part of the transaction, Synnex will enter into a multi-year agreement with IB, and Concentrix will become an IBM strategic business partner for global customer care business process outsourcing services. Post-transaction, IBM will have an equity interest in Synnex. While the transaction is being completed, the companies will continue to operate independently and IBM customer care business process outsourcing services will continue to be sold and delivered as usual. Through the acquisition of IBM's customer care business process outsourcing services business, Concentrix will provide customer care services for clients across more than 12 industries.

In a note posted on the company website in the last week of November, the parent firm-Synnex completed "a new financing arrangement to fund the acquisition of IBM's customer relationship management business as well as SYNNEX' general working capital requirements." Synnex has entered into a credit agreement with a group of commercial banks which provides for the extension of a revolving credit facility of $275 mn and a term loan of $225 mn. Under the credit agreement, SYNNEX has the ability to request an increase in the amount of the revolving facility and/or term loan by an aggregate maximum principal amount of up to $125 mn. The credit agreement announced today replaces SYNNEX' prior $100 mn revolving credit agreement originally dated November 12, 2010. Both the revolving credit facility and term loan extended under the new credit agreement will mature in November 2018. In connection with the new credit agreement; Bank of America, N.A. acted as the administrative agent while the Bank of Nova Scotia and the Royal Bank of Scotland acted as co-syndication agents.

Synnex-which specializes in technology, consumer electronics, gaming, broadcast, and social media-has been working on the deal for a year and a half, indicating its keen interest in expanding its footprint in the Indian market. Currently, the firm is going through government approvals and hopes to complete the transaction by Q1 of 2014. Post the buy-out, Concentrix will have approximately 45,000 employees servicing over 300 clients. India will be the biggest office in terms of size for Concentrix and will host approximately 21,000 employees.

"Concentrix has been in India for a little over two years and has been looking at increasing its investment and growing its business in India," says Chris Caldwell, President, Concentrix Corporation, while speaking to Dataquest. This also includes further acquisitions, especially in the technology sector. He further adds, "We're going to make investments in M&A as a big part of our strategy. In fact, the firm is quite focused on entrepreneurial ventures, especially smaller IT firms with solutions. Subject to the satisfaction of regulatory requirements and customary closing conditions, the US-based firm hopes to complete the transaction by the first quarter of 2014."

Speaking on the changing trends within the industry, Caldwell says that clients, today, are looking at BPOs differently. They realize that multiple partners are extensive to manage and doesn't necessarily drive to the results. Secondly, clients today, look for complete solutions. Earlier, they would outsource one function of a process now they want the vendor to take over the whole process, including automation and technology. Lastly, more customers are looking for outcome-based pricing, where it is about taking over a process and managing it at a certain cost level and you're awarded with how much revenue you're saving for your client, he says