Mercury Rising On Mergers & Acquisitions
posted in Outsourcing News and Top Outsourcing deals |Source: Economic Times
A joint bid by Carlyle, a private equity major and serial entrepreneur Ramesh Vangal is set to snap up Cambridge Solutions, one of the largest listed BPO companies, pipping rival bidders like EDS, Apollo and HCL to the post. Sources affirm Carlyle is expected to buy about 42% of the promoter stake on the block for about $170-million.
This acquisition for which the PE major has joined hands with Mr. Vangal, a co-founder, as well as, the largest individual shareholder in Cambridge with an 18% stake to affect a buyout, will help unveil the Carlyle Group’s biggest investment in India till date.
The joint bid will control around 60% of the stake in the acquired firm valued at around $250-million, and which carries an enterprise valuation of $400-million. This will be the second largest transaction in the domestic BPO state after Oak Hill and General Atlantic took a 60% stake in Genpact, with the former General Electric Company valued at $500-million.
Carlyle’s move to buy into Cambridge, with the latter having substantial revenues locked up in the insurance processing domain, could unleash synergies given its rather large exposure to the insurance sector in the US. While, Mr Vangal could keep his equity holding intact and play a more proactive role, it unlikely he will return to the operational structure, he quit last year over differences with the existing promoters.
To be unveiled in the next few weeks after completing formalities, the promoters exiting Cambridge Solutions (formerly Scandent Solutions) include ex-McKinsey honcho Rajat Gupta, former Pepsico chairman Chris Sinclair, US-Canadian Bronfman family of Seagram fame and the Chanderia family.
Earlier this year, Lehman Brothers was mandated by the promoters to find a suitor for their holding. It is learnt that the bulk of the 59.15% promoter holding, including that of Mr Vangal is jointly held in a Mauritius entity, which is in the process of being unbundled. While, almost two-thirds of Cambridge’s Rs. 1,200-crore revenue comes from high-end BPO operations spread across the US, India and Europe. Cambridge also has a strong presence in the lucrative insurance processing domain, with around 2,000 of its total 4,500-employees based in USA.
Five years ago, Mr Vangal together with Rajat Gupta and others, set up Scandent Solutions, a broad-based IT services company, and in 2004 went on to buy Cambridge Integrated Services, a global outsourcing firm and a part of the US-based Aon Corporation for $125-million. A year later, Scandent Solutions merged with Cambridge Services to form Cambridge Solutions.
It seems mergers & acquisitions are the order of the day for Indian firms, just as a few years ago the trend took over North America. It remains to be seen how well it works and if it helps to rake in bigger profits.
