Contact Center Review
Contact Center Review, an initiative by Novistra Capital, is a curated quarterly newsletter to keep you updated about the Contact Center industry. In our first edition of the year, we bring you a few insights & developments, along with select M&A transactions for Q1 2022.
Last year presented challenges for the Contact Center & BPO industry as it resisted COVID-19 related disruptions and labour market challenges by accelerating digital transformation and adapting to the hybrid working conditions. Earlier this year, the sector displayed signs of optimism with receding COVID-19 restrictions and revival in global travel. Also, rise in E-commerce volumes and consumption of digital content led to heightened demand for order fulfilment, customer experience (CX) management, data annotation and content moderation. However, rising inflation and the risk of a potential recession in the US economy would usher strong headwinds for the industry as companies would consider cost control measures, including reduced budgets for outsourcing.
Nearshoring expanded during the COVID-19 pandemic as companies sought locations closer to end-markets. The LACA region, with its close proximity to the US, multilingual talent pool and government incentives, is becoming increasingly attractive for companies in comparison with the traditional markets. LACA countries such as Belize and Trinidad & Tobago are trending locations for contact centers over more mature markets such as Jamaica and Costa Rica.
The contact center industry reported stable M&A activity in Q1 2022. Strategic buyers pursued acquisitions with complementary offerings and new end-user markets. With focus on building a portfolio of services, PE-backed players continued to build their existing platforms through bolt-on acquisitions. Novistra closed three transactions in 2021 and remains very active in the BPO and contact center industry and is currently running transactions across North America and APAC regions. We expect some consolidation in the industry, together with digital transformation to drive deal volumes in 2022.
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About Novistra
Novistra Capital is a boutique M&A and PE advisory group with a strong focus on the Contact Center Industry. Founded in 2010, Novistra has a team of experienced professionals, located across three offices in the US, UK and India. Please contact the following members of the Novistra team to discuss strategic options for your company.
Ripun Jai Mehta
Managing Partner
ripun.mehta@novistra.com
(646) 645 1935
Pankaj Arora
Managing Director
pankaj.arora@novistra.com
(917) 460 0659
Peter X. Li
Managing Director
peter.li@novistra.com
(917) 250 8605
Anuj Jaisinghani
Vice President
anuj.jaisinghani@novistra.com
(437) 234 1151
Nearshoring in LACA region continues to grow
Many contact centers have expanded their operations to nearshore locations for its proximity with the serviceable end customer markets. The Latin America and the Caribbean (LACA) region works closely with the North American market and employs approximately 1.3 million contact center workers. The region benefitted the most during the COVID-19 pandemic as major outsourcing markets such as India and the Philippines struggled to transition to remote working conditions. FDI in the LACA region sharply rebounded in 2021 ($134 billion, up from $88 billion in 2020), as foreign companies pumped funds into the region’s ICT and renewable energy projects. Mexico and Costa Rica saw a surge in ICT investments.
Since 2020, as organizations started to pivot their interest to nearshore locations, the LACA region has added 65,000 jobs in approximately 90 call centers, indicating a trend of geographic shift in the contact center industry. However, growth in a few LACA countries such as Puerto Rico, Brazil, Argentina and Uruguay has plateaued with the saturating contact center industry that is driving up wages and attrition rates.
The demand for nearshoring continues to grow in the LACA region, given its bilingual workforce and lower average wages. The average hourly wage in the region for a bilingual contact center agent remains 50-75% lower than the US ($15-20 /hour). The Russia-Ukraine war has negatively impacted Eastern Europe’s outsourcing market and has further increased the demand for CX service partners in the LACA region.
The region is witnessing a preference for a few countries, including Belize, Trinidad & Tobago and Colombia, given their robust government incentives and talent pools. San Jose, Costa Rica, remains a top location and has been very successful in attracting a diverse group of companies including HP, IBM, Oracle, and P&G. In the Caribbean, larger islands, including Jamaica and Dominican Republic are preferred by companies due to limited scalability constraints. Cities with fluent English-speaking agents, including Tijuana, Mexico and Panama City, are witnessing greater demand due to increased CSAT levels.
Nearshoring from the LACA region continues to gain market share as companies are looking to consolidate pan-Latin America operations or serve customers in high-cost locations such as the US.
BPO Job Creation in LACA Region
Select M&A Transactions in Q1 2022
Select M&A Deals in the Contact Center industry
Tunstall Healthcare, a UK based provider of technology services and healthcare software solutions, announced the acquisition of BeWo Unternehmensgruppe (BeWo). BeWo is a provider of call centre services, social alarm and device technology and management solutions in Germany. Financial details of the transaction were not disclosed. The acquisition sees Tunstall join forces with BeWo to deliver its home emergency call center solutions in Germany and explore the technical possibilities of telehealth and smart home via uniform central platform. The acquisition also marks a shift in the current social care operations in Germany, with emphasis on a solution focused platform that can be accessed by hospitals and care homes.
Renovus Capital Partners backed Inflow Communications (InflowCX), a US-based provider of strategic advisory, consulting and customer experience solutions, announced the acquisition of EPIC Connections (EPIC) for $5.7 million. Based in Omaha, Nebraska, EPIC offers sector agnostic consulting, BPO and contact center services to Fortune 500 and SMB clients. InflowCX’s expansive service portfolio is complementary to EPIC’s experience in operational consulting, outsourcing and customer experience technology implementation. EPIC’s team complements InflowCX’s offerings and furthers its ability to deliver an expanded suite of value-add services for its clients and technology partners. As a market leader, InflowCX continues to focus on building a portfolio of services for its clients.
Cart.com, an end-to-end e-commerce software and services provider, announced its acquisition of FB Flurry, a technology driven fulfillment and customer care operator for leading DTC brands. Started in 2018, FB Flurry distributes more than 35 million product units annually from four fully-owned fulfillment centers and provides 24/7 customer care services from its 200-seat service center. Financial details of the transaction were not disclosed. Cart.com will integrate FB Flurry’s capabilities into its rapidly expanding network of logistics, customer care and operational support centers, including eight new fulfillment centers that started in 2021. The company’s advanced technologies and data-driven operational support will complement Cart.com’s unified ecommerce platform, analytics and marketing service capabilities.
Teleperformance, a global leader in digitally integrated business services, announced the acquisition of Senture, an operator of BPO and contact center services, for $400 million. Founded in 2003 and headquartered in London, Kentucky, Senture offers onshore citizen experience and healthcare support services to the US federal, state and local governments. Senture closed FYE 2021 with revenues of $192 million and an adjusted EBITA margin of 16%. Senture’s citizen support activities are specifically designed to handle queries in healthcare, education, transportation and social services. This acquisition will reinforce Teleperformance global leadership in the citizen lines of service vertical, which offers strong growth potential worldwide, especially in the US. The merger also positively impacts Teleperformance’s profitability profile and is consistent with the company’s vertical specialization strategy.
The US Contact Center Industry outperformed in Q2 21
Public Comparable Company Analysis – US Contact Center Industry
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