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January 7, 2013
MW Transaction Analysis 
Convergys to Acquire Stream Global Services 

Financial Overview
  • Total Transaction Size:                                                  $820 Million
  • Implied Enterprise Value (EV):                                      $820 Million
  • EV/LTM Revenue:                                                                         1.0x
  • EV/LTM EBITDA:                                                                           8.4x             
Transaction Facts
  • Convergys Corporation (NYSE:CVG) and Stream Global Services, Inc., major BPO and customer services providers, announced a merger agreement yesterday where Convergys will acquire Stream for $820 million.
  • Based in Cincinnati, Ohio, Convergys gains Stream's growing market share in Central and Latin America and will, post-acquisition, serve clients in 35 languages from 25 countries.
  • Convergys expects the acquisition to add $0.35 in NTM diluted EPS.
  • The transaction will be financed by $400 million of cash on hand, a $350 million loan and the rest from existing credit facilities--another data point that M&A is being fueled by low interest rates and a robust lending environment. 
  • Combined, the two firms will create the second largest customer management services provider in the world with approximately $3 billion in revenue.
  • Convergys stock closed up 7.3% over yesterday's closing price.
Gaining Scale to Solidify An Advantage
  • Transformation through Acqusition: The company that is now Stream Global Services, Inc. was initially the contact services business of Software Spectrum, which was later bought by Insight. It was sold in 2003 to H.I.G. Capital Management for $8 million. Over the following ten years, the company grew both organically and through ten acquisitions across Latin America, Europe and Africa.
  • A Consolidation Trend: This deal is the latest in a series of major consolidations in the BPO space, including Accenture's October acquisition of Procurian for $375 million and SYNNEX's September acquisition of IBM's BPO Services business for $505 million. 
  • Buying Customers and Capabilities: Convergys and Stream are active in many of the same spaces, such as telecom, technology and retail. The transaction will allow Convergys to increase their efficiency and perform cost takeouts.
  • Global Clients, Global Capabilities: With this acquisition, Convergys is expanding both their client base and their global reach, ensuring that they will be able to serve their existing and new customers across multiple continents.
For more information, read the press release.

martinwolf was not the advisor in this transaction.

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 nine 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 [email protected]

 

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