The acquisition will supplement the knowledge business of WNS which provides market research, business and financial research, and analytics services. The existing clients of WNS are in the travel, banking, financial services and insurance industries. With the Marketics acquisition, WNS will add capability in the consumer goods, retail, and media and entertainment sectors.
WNS will pay $30 million at the closing of the deal and an additional earn-out payment of up to $35 million over a 12-month period, financing the acquisition off its balance sheet. WNS did not release financial data of the target, which is closely held, but market sources placed Marketics revenue for fiscal 2005-06 at $4 million on which it had an Ebitda margin of over 30%. Marketics aims to reach revenues of $100 million over the next four years. Analysts commented that WNS is paying for the future potential of the business, the existing contracts and for Marketics' 200 highly specialised employees.
Neeraj Bhargava, WNS group chief executive officer, says: ôThis acquisition will help us penetrate new consumer-centric industries and move us further up the value chain in our service offering."
Marketics captures a few of the trends permeating corporate India in general and the BPO sector specifically. The company was started in 2003 by a group of young professionals who bring together backgrounds in marketing, market research and information technology. The entrepreneurial bug is responsible for many of IndiaÆs success stories including legendary companies like Infosys. The founders of Marketics understood early on the need to differentiate their offering and focused on high value-add outsourcing where the entry barriers are higher, namely data analytics. This strategy has been successful and Marketics has been successful in winning business from Fortune 500 companies.
Data analytics has become such a large part of the BPO pie that a new name has been coined for it, knowledge process outsourcing, now known by the acronym, KPO. The driver to hire a KPO firm is not cost arbitrage but rather is the ability for a company to improve revenues and bottom line through a better understanding of their customer. NASSCOM, IndiaÆs software services association, estimates that the KPO business is where future growth lies, predicting that by 2010 the global KPO pie will be $17 billion, of which about two-thirds will be outsourced to India.
In July, 2006 WNS became IndiaÆs first BPO to list on the NYSE. The offering was keenly watched by a number of other BPOs who are planning IPOs including big daddy, Genpact (the former GE BPO subsidiary), which could be the largest issuance by an Indian company in the US.
WNS raised $224 million from its IPO but only 40% of that went towards the company. Founding shareholder, British Airways, used the IPO to completely exit its 15% stake in the company, while private equity investor, Warburg Pincus, reduced its stake from 65% to 54%. The pricing valued WNS at 36 times fiscal 2006 earnings, in recognition of the high growth trajectory the company was on.
WNS has already made three acquisitions: Town and Country Assistance, an auto claims collection firm; ClaimsBPO, the India-based healthcare BPO business of GreenSnow from the US; and an Arizona-based mortgage BPO firm called Trinity Partners.
WNS shares were down 0.7% at $31.73 in early trading on the NYSE last night.
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