Largest M&A deal in Indian BPO sector. In what will be the largest deal in the information technology-enabled services sector, IBM has decided to buy out Daksh eServices, the third largest business process outsourcing company in the country, for about Rs 650-800 crore. The deal is expected to be completed by next month.
The deal will add 6,000 employees to IBM's 9,000-strong workforce in India and also 10 big-ticket clients, including Amazon.com and Citimortgage.
Daksh clocked revenues of $30 million in 2002-03 and expected to notch up a turnover of $50-55 million in 2003-04. The acquisition will catapult IBM into the top two in the third- party outsourcing segment, close to Wipro Spectramind.
The IBM move is in line with its focus on tapping the booming outsourcing market. The company had recently struck a $750 million deal with telecom major Bharti Tele-Ventures for outsourcing its IT management services. It will also enhance IBM's own business process outsourcing arm, IBM Global Services.
While Daksh's top management will be retained by IBM, it is not known whether Sanjeev Aggarwal, one of the promoters, will continue to head the company as its CEO. The other three equity partners, General Atlantic Partners, CDC and Citigroup, hold two-thirds of Daksh's equity.
"The acquisition of Daksh will enhance IBM's business transformation capabilities in areas like customer relationship management and financial management services in industries like banking, insurance, retail, technology, telecommunications, and travel and transportation. This will also increase the scope of IBM's global network of 22 business transformation delivery centres, adding capabilities in India and the Philippines, " an IBM statement said.
The move comes at a time when Daksh is on the verge of executing a major expansion plan and an initial public offer later this year. Daksh planned to take its employee strength to 10,000 in 2005 from the present 6,000. It expected to touch the $100 million mark in revenue by the end of the current financial year.
Daksh's clientele comprises a list of Fortune 500 companies that are market leaders in their domains. The company has infrastructure spread over five facilities in India, of which, four are in Gurgaon and one in Mumbai.
Recently, Daksh eServices announced the opening of its overseas facility in Manila. This state-of-the-art facility is spread over 2,900 square metres and is expected to employ 1,000 people in the next 12 months.
According to Sanjeev Aggarwal, "Daksh has made its mark rapidly in the global business services market by providing clients not just with cost efficiencies, but also with significant improvements in the way they run their business."
What Daksh brings to IBM
- A 6,000-strong workforce and four call centres
- Revenues of $50-55 million (during 2003-04)
- Skill sets in customer relationship and financial management in the services sector
- Top clientele includes Amazon, Sprint, Citimortgage
