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MW Transaction Analysis
SYNNEX Announces Acquisition of IBM's Customer Care BPO Services Business
Financial Overview:
- Total Transaction Size: $505M
- Expected Addition to Combined EBITDA: $120M
- Implied EV/EBITDA Multiple: 4.2x
Transaction Facts
- SYNNEX Corporation (NYSE:SNX) announced yesterday that it has entered into an agreement to acquire IBM's (NYSE:IBM) $1.2 billion+ worldwide customer care business process outsourcing (BPO) services business for $505 million - $430 million of the purchase price in cash and $75 million in SYNNEX common stock.
- The business will be fully integrated with Concentrix, a wholly-owned subsidiary of SYNNEX, making Concentrix a top 10 provider in the space with approximately 45,000 employees serving over 300 clients through 50 delivery centers across six continents.
 - SYNNEX will further enter into a multi-year agreement with IBM in which Concentrix will become an IBM strategic business partner for global customer care BPO services.
- SYNNEX expects the transaction to be very accretive, with an estimated $120 million in EBITDA and approximately $0.55 in fully diluted EPS in the first year, excluding one-time costs.
- SYNNEX shares were up nearly 10 percent in after-hours trading on news of the deal.
Focusing on Core Businesses
- The transaction is a dramatic and smart way for SYNNEX to differentiate itself from other mainline distributors through adding higher margin services. Currently SYNNEX gross margin less than 7 percent - usually, the EBITDA of the type of business that it is acquiring is greater than 7 percent.
- SYNNEX has been building Concentrix through five other acquisitions in the services space over the previous five years. However, this is the largest transaction to date.
- The deal illustrates the importance of scale in the customer care space; increasing competition requires companies to differentiate through global reach and broader, more diverse offerings.
- With this acquisition, SYNNEX continues its efforts to diversify beyond distribution to remain competitive while further solidifying its IBM relationship.
- For IBM, the transaction is a continuation of its strategy of divesting its lower margin businesses in favor of higher value services, including social, mobile, big data and cloud technologies. Selling its customer care BPO business to SYNNEX allows IBM to focus on its new businesses without strengthening a competitor.
For more information, see the press release.
martinwolf was not the advisor in this transaction.
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About martinwolf
San Francisco, CA Bangalore, India
With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies.
The firm is also a presenting sponsor of the Global IT M&A Forum.
martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.
To learn more about martinwolf, contact Matthew Putzulu at mputzulu@martinwolf.com.
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