IBM, Convergys & Bain in early talks to buy Intelenet

IBM and Convergys are among contenders said to be in talks for a potential $1.2 billion acquisition of Intelenet, an outsourcing company owned by Blackstone Group, the world’s largest alternative asset manager.
 
Boston-based private equity firm Bain Capital, which owns one-third of outsourcing firm Genpact, is also in the fray to acquire Intelenet as the Blackstone Group looks to sell the company a second time, multiple sources with direct knowledge of the process told ET.
 
If a deal does take place at the $1-1.2 billion valuation that some have pegged the price at, Blackstone will get a return of more than three times from a three-year-old investment or a 60% internal rate of return (IRR) in dollar terms, sources said.
 
The average net IRR of Indian PE firms is 14.7%, according to data compiled by Preqin, a UK-based industry tracker.
 
Blackstone has mandated JPMorgan to run a formal process to find a buyer, sources said. Spokespersons for Blackstone and Bain Capital declined to comment. Convergys and IBM did not respond to emailed questions.
 
ET reported in October last year that Intelenet is weighing options to provide an exit for Blackstone, though no clear-cut plan had been decided.
 
Intelenet executive chairman Susir Kumar Mangalore told ET at the time that the company had begun to weigh its options though it had no immediate need to provide an exit to its private equity owner. The US fund had first acquired Intelenet from some investors including Barclays for about $260 million in 2007 and sold it to UK-based Serco for $634 million in 2011.
 
Two years later, Serco decided to exit and Blackstone bought Intelenet back for about £250 million. “They knew the business at Intelenet. They are on the verge of selling it again with a significant return,” said one of the sources close to the deal.
 
Intelenet was set up in 2000 as an equal joint venture between Tata Consultancy Services and HDFC. Intelenet currently employs 55,000 people in the Americas, UK, Europe, Middle East, India and the Philippines. TCS sold its stake to Barclays in 2004.
 
Convergys was one of the first US-based business processing management companies to operate in India. It has seven offices in the country and has been looking to expand. IBM has a significant presence in India with 14 centres.
 
Bain Capital is one of the most aggressive investors in India. The PE firm, which acquired Genpact in 2013 for $1 billion, has been looking for big-ticket deals and companies in the technology space.
 
Private equity exits hit a record $13 billion in value terms in 2017, almost twice that of the previous high of $6.7 billion posted in 2016, according to data compiled by EY. However, strategic exits recorded a significant decline with $881 million in 42 deals in 2017 compared with $2.7 billion in 55 deals in 2016.
 
The technology sector, including e-commerce, retained its dominant position with $11 billion invested in 346 deals, accounting for 45% of private equity investment in 2017, data from global consultant PwC showed. The sector witnessed three of the largest deals this year with SoftBank and Tencent being at the forefront.
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