“With the rise in more consumer-facing businesses, all companies are investing in consumer experience. That's why PE funds are investing into BPM firms, which primarily deal in this segment,” said Pareekh Jain, founder of Pareekh Consulting. “Also, PE firms are eyeing the space as they can exit with huge gain during the consolidation phase.”
Some of the big investments and exits by global PE majors are reflective of this trend. For instance, Blackstone exited Mumbai-based BPM services firm Intelenet by selling its stake to French firm Teleperformance in October last year. The exit, biggest for Blackstone from among its Indian portfolio, got it $830 million.
Capital Square Partners (CSP) had entered into an agreement with US-based StarTek for merger of its portfolio company, Aegis, in March last year.
On the investment front, AION Capital Partners, a joint venture between global PE fund Apollo Global Management and domestic fund ICICI Venture, acquired InterGlobe Technologies (IGT), back-office arm of InterGlobe Enterprises, for $230 mn this week.
One of the biggest investments in the BPM space came in May last year, when Warburg Pincus invested close to $1 billion in outsourcing firm Vivtera. Backed by three sector veterans and former Genpact executives Mohit Thukral, Gaurav Sethi and Harpeet Duggal, it has been one of the biggest deals in the BPM space.
Analysts say BPM offers much opportunity for PE players as the sector has seen steady growth in recent years. According to Nasscom, India continues to be the largest BPM base in the world, generating annual revenue close to $32.5 bn, with an employee strength of 1.2 mn.
Also, penetration of digital technologies like data analytics, apart from higher spending on digital marketing, make BPM attractive for fund houses.
"Both analytics and digital marketing come under the BPM umbrella. As these are the emerging areas with huge growth opportunities, PE players see scope for huge gains in the coming years," says the partner of a Bengaluru-based VC firm.
Nasscom says global spending on analytics and big data is likely to touch around $200 bn, with the market size under robotic process automation more than $5 bn, by 2020. These emerging technology areas will be future growth drivers for the BPM space.