CVC may quit $400m deal for Serco’s BPO

MUMBAI: Private equity giant CVC Capital Partners may walk away from the $400-million acquisition of London-listed Serco Plc's Indian business process outsourcing unit - formerly called Intelenet - in a rare instance of management hostility foiling a takeover bid.
The latest development could swing the deal in favour of former owner and world's largest private equity manager Blackstone Group, which had also placed a bid to buy back India's third largest BPO firm.CVC, which along with portfolio company SPi Global of Philippines, emerged as preferred bidder and had completed due diligence before finalizing the deal.
CVC and SPi Global informed Serco that it would proceed with the deal only if issues pertaining to a hostile Indian management are addressed, people directly familiar with the matter said. But Serco may not disturb the top management at the Indian unit, which has a strong rapport with some key clients, sources added, opening up doors for Blackstone's potential comeback.
In January this year, Serco started a process to divest some international assets, including the Indian operations, as part of a plan to pare debt. This came four years after it acquired Intelenet from Blackstone for $634 million to boost presence in India.

Industry veteran Susir Kumar-led management is not seen favouring the terms of a potential merger deal with SPi Global, backed by CVC's firepower. Kumar and his team, which built Intelenet over the years, would prefer a private equity driven spin-off deal. In fact, they had approached Serco to explore a management buyout but the latter preferred to run an auction process.
Media reports suggesting that senior executives were poised to quit surfaced after CVC and SPi emerged as frontrunners. The combine lost their preferred bidder status two weeks back as the deal making dragged over concerns about a management rebellion. "CVC has been in pen-down mode after flagging serious concerns to Serco. A deal is still possible if Serco addresses issues regarding a hostile management," sources mentioned earlier said?
When TOI contacted Serco, the company's spokesperson said, "The board is assessing a number of different options. We have no further comment to make." Susir Kumar could not be reached despite repeated efforts. CVC Capital could not be reached for immediate comments.
Serco's Indian unit ranks after Genpact and TCS, employing over 40,000 people in the country. It caters to customers in banking and financial services, insurance, retail, travel, telecom, healthcare, utilities and media. Blackstone's buyback bid always carried heft as Kumar and his team scaled up Intelenet revenues by winning work from Blackstone's portfolio companies like Hilton Hotels and Travelport. These clients still account for 15-20% of the current revenue.
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