Sallie Mae had earlier last year announced that it was pulling 2,000 jobs back  to the US. Part of the reason they did that was to continue to be the provider of student loan by the US federal government. Sallie Mae lost the battle against the department of education and the new administration to manage the student loans, which the department of education is now planning to do in house. Sallie Mae since then had announced that it will reduce their staff more.

The asset sale, back office sale by Sallie Mae is a trend which has been seen in a few operation center deals in the US ( Walgreen-Genpact) where the third party providers are taking over captive centers in the US for companies. The goal is that the third party providers like Aegis have global delivery expertise which they can leverage to reduce cost of existing operations.
SOURCE: Press Release
DATE: May 18th, 2010

Aegis Limited, a leading global business process outsourcing (BPO) provider and part of the Essar Group, a multi-national conglomerate with approximately $15 billion in annual revenues, today announced that it has signed an agreement with US-based education finance service provider Sallie Mae to acquire its customer service center in Killeen, Texas, and transfer 350 Sallie Mae employees to Aegis’ global delivery platform consisting of approximately 40,000 professionals located in 43 locations worldwide. This agreement is effective June 4, 2010.

Aparup Sengupta, Managing Director and Global CEO of Aegis Ltd., said, “This agreement enables Aegis to expand its service offerings with highly skilled customer service professionals. Aegis will leverage Sallie Mae’s expertise in quality and performance improvement and integrate the Killeen center into our global delivery platform.”

Commenting on the transaction, Sandip Sen, President (Americas) and Global Chief Marketing Officer of Aegis Ltd., said, “Aegis is committed to aggressively growing its business in the U.S. Our new facility in Killeen, Texas marks Aegis’ tenth center in the U.S., and we look forward to continuing to grow our capabilities in North America.”

Jack Hewes, Senior Executive Vice President and Chief Lending Officer of Sallie Mae, commented, “This is the outcome we hoped for as we faced the unenviable task of restructuring our business in response to legislative changes. We are delighted to have found a great employer like Aegis who will inherit our talented staff and provide them with growth opportunities right here at home.”

About Aegis
Aegis is a global leader in business process outsourcing (BPO) and has over two decades of leadership in customer lifecycle management. Built on the mantra of personalized solutions and the co-creation of value, Aegis is one of the fastest growing BPO companies in the world. An Essar Group enterprise, Aegis offers the benefits of a global delivery model, strong financial strength, deep industry expertise, comprehensive and flexible solution offerings, and a rich international talent pool. Aegis services more than 135 clients from 43 delivery centers with approximately 40,000 employees across India, the Philippines, United States, Costa Rica, New Zealand, Sri Lanka, Australia and South Africa. For more information, please visit http://www.aegisglobal.com.

About Sallie Mae SLM Corporation , commonly known as Sallie Mae, is the nation’s leading saving, planning and paying for education company. Sallie Mae’s saving programs, planning resources and financing options have helped more than 31 million people make the investment in higher education. Through its subsidiaries, the company manages $182 billion in education loans and serves 10 million student and parent customers. In addition, the company’s Upromise program has enabled 12 million members to earn more than $525 million in rewards to help pay for college. Its Upromise affiliates also manage more than $25 billion in 529 college-savings plans. Sallie Mae offers services to a range of institutional clients, including colleges and universities, student loan guarantors and state and federal agencies. More information is available at http://www.SallieMae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

The Ruias of Essar will invest nearly Rs 400 crore in rolling out the first batch of Aegis campuses in India. The new campuses will be sprawling tech parks housing BPO units, entertainment facilities, gyms, swimming pools and residential complexes.

“The Aegis management has decided to invest in four campuses in the first stage. Investment in each campus could be close to Rs 100 crore. We are looking at places like Coimbatore, Ahmedabad, Vadodara, Delhi, Noida, Gurgaon and some eastern locations too to evolve a countrywide grid.

More… 

http://www.aegisglobal.com/

Etisalat India signs a 5 year $150 outsourcing deal with Aegis, Tech Mahindra & Conflux. Etisalat had earlier announced an IT outsourcing deal with Tech Mahindra of around $400 million.

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This is in line with the Group’s intention to expand its business in the African continent.

When contacted, Aegis spokesperson said, “We keep looking at growth opportunities. However, it is not our policy to comment on any specific issue.”

Earlier this month, Essar Global Chairman Shashi Ruia had said that the company was looking at acquisitions in Africa.

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The company plans to hire 1,000 people every month in India and across United States, Philippines, Costa Rica and Africa where it currently has operations.

“We will be recruiting a thousand people every month, so this year we will add 12,000 to our workforce globally. We have already hired 3,000 people since the beginning of this fiscal,” Aegis Limited Managing Director and Global CEO Aparup Sengupta told PTI here.

More..

Aegis communication an Essar group BPO firm has agreed to buy UCMS Group, an Australian outsourcing firm for around $36 million USD. Aegis has continues to grow inorganically and over the past year has acquired AOL support center in India, Peoplesupport for $250 million.

Aegis employee strength: 32,000

In a recent interview , Aegis  CEO Aparup Sengupta mentioned that the firm has acquired 11 companies during the last four years. Revenues of $500, million.

The CEO credit’s their merger success to the five 9’s.  We complete the integration process in 9 hours, 9 days, 9 weeks and 99 days!!

The new organisational strategy is charted out in 9 hours. In 9 days, we roll out the key performing indicators for both the teams. We complete the entire integration process in 99 days. In 9 weeks, we run the business operating metrics. The process helps to integrate, involve and inspire the workforce after a merger.

With opportunities come risks. The best way to address risks is for buyers and their advisors to recognize them and plan their strategies accordingly, as described below. Identification of target markets presents the first challenge.

Market expansion opportunities are increasing at the same time that the outsourcing field is undergoing transformation, thanks in part to its own success. Outsourcing formerly represented a separate, recognizable business field with distinct boundaries.

Changing Times
While we can still identify leading service providers and industry trends, especially in voice-based general customer service operations, the non-voice or blended voice/non-voice outsourcing field has become increasingly vague. Where has it gone? It has diffused into the industries in which it serves.

In the human resource field, for example, distinctions between offshore outsourcers and onshore providers with global operations are blurring. Globalization, increases in the offloading of business processes and the common practice of handling some tasks with both onshore and offshore providers simultaneously is changing the face of outsourcing.

Buyers seeking to acquire specialty outsourcing companies will benefit from looking at market behavior within specialty outsourcing sectors rather than general merchant outsourcing. Specialty sectors are not always easy for international buyers to identify independently, especially in countries where large conglomerates dominate the economy and are highly integrated both vertically and horizontally. This is particularly the case in South Asia, where large organizations do not customarily break out specific business functions for outsourcing with the frequency that we see in the United States.

The role of acquisition advisors begins by helping buyers identify different market-entry points, verticals and niches. This can occur as part of a strategic market study, conducted as the first task in a merger and acquisition project.

Aligning Expectations With Market Realities
The initial challenge for advisors in an acquisition process is to align buyer expectations with market realities. The next challenge is to educate buyers how to realize the best value for the money that will be spent in the acquisition. We begin here with client expectations and a focus on South Asian buyers.

Most South Asian buyers and entrepreneurs find it difficult to translate valuations of American companies into economic figures that make sense in South Asian terms. In South Asia it is possible to spend US$300,000 (after transaction costs) to acquire a financially healthy company with headcounts in excess of 50-100 people. In the United States, in contrast, there are catering trucks that do more than $300,000 in business annually.

In 2006, when we examined prices for small (less than 125 seats), marginally profitable operations, we found that most arrangements for buying Indian call centers were cash neutral. Buyers relieved sellers of lease obligations and equipment rental contracts with no valuation premiums.

The appearance of valuation disparities is aggravated by a lack of credit facilities for South Asian companies, especially in the outsourcing field. Without a strong secondary market for private bonds in South Asia, companies rely heavily on stock issuance to meet their capital requirements. Consequently, market capitalizations based on outstanding stocks multiplied by current stock prices will appear inflated by U.S. standards.

South Asian companies tend to buy companies or operations that are too small to efficiently benefit from having fresh access to offshore production or service centers. Firstsource (formerly ICICI OneSource) and vCustomer are notable exceptions in this regard and in how effectively they handle post-acquisition brand management, a subject addressed below.

On the question of identifying suitable targets, each outsourcing specialty has a point at which acquisitions and rollups become financially feasible. In the accounts receivable field (which includes the collections industry), acquisition prices below $10-$20 million present challenges in terms of generating economies of scale and sufficient work volumes that can be shifted to lower-cost destinations. The “sweet spot” for profitability for an acquirer does not begin until $40 million and up.

A key task for advisors to offshore buyers is to align buyer expectations with market realities. This begins with strategic advice on where and how to enter a market. It extends to post-acquisition brand management and process migration. For additional information, see this article on the role of investment banks as acquisition advisors.

Post-Acquisition Brand Management
Another common failure point for offshore buyers is in regard to post-acquisition brand management. Essar’s acquisition of Aegis (Aegis Communications Inc. — not Aegis.com or Aegis LLC) provides one example of lackluster brand support following an acquisition. Aditya Birla Minacs provides another. The Resource Group provides 19 examples of investments and acquisitions since 2002 that have not been used to produce a strong client-facing brand but rather one designed to appeal to investors.

In making acquisitions of U.S. business units, offshore buyers may not fully grasp where the value rests in their acquisitions, preferring to focus too heavily on headcounts and on tangible assets such as the number of computer terminals. As a consequence, buyers can depress the valuations of their newly acquired assets — effectively overpaying for them.

An example of post-acquisition brand dilution is provided by Indian conglomerate Aditya Birla, which entered the customer service business in June 2003 with the acquisition of Transworks, a highly regarded Indian call center company with facilities in Mumbai and Bangalore. This was followed in June 2006 by Aditya Birla’s acquisition of the Canadian call center company Minacs.

The Transworks brand was discontinued in favor of the brand Aditya Birla Minacs. In place of Transworks (strong, memorable) is a string of three words that are not familiar to Americans and not easy for American clients to recall with positive connotations. The new three-word nomenclature is not consistent with the goal of having a short, snappy brand that appeals to customers, is easy to spell and remember, and is represented exactly in a corresponding dot-com domain.

How many people could remember how to spell and find their way back to the subdomain www.minacs.adityabirla.com? Without the words ‘call’ or ‘voice,’ how easy will it be for search engines to associate that homepage and its associated brand with call center outsourcing?

The old Minacs Web site is still up, orphaned at http://minacs.com. Meanwhile, two unrelated parties are preying on the brand confusion and drawing clients away with Aditya.com and Adityaa.in. The response of Aditya Birla Minacs? Still waiting…

The Ten Commandments of Branding provides tips on brand management for outsourcing and customer service companies. It defines outsourcing version 1.0 as a sellers’ market, when clients were likely to initially seek out a single prime vendor and were often willing to overlook brand issues, padded prices and service providers that lacked marketing savvy.

Beginning in late 2006 and early 2007, outsourcing version 2.0 became popular as clients found that outsourcing had become a buyers’ market. Buyers gained confidence in managing multiple vendors and found it easier to obtain more competitive prices. Service providers in outsourcing 2.0 attract clients through a combination of brand image, quality and value.

For Touchstone Communications, outsourcing version 2.0 meant adapting offshore staff to American standards rather than adapting Americans to offshore standards. As described in Offshore Lessons, this led Touchstone to strengthen process migration and training and to create an American workplace culture in their offshore financial-services facility.

Process Migration and Training
Conducting business remotely and with international customers requires skill sets that are not always easy to learn. It requires focused efforts at training and monitoring.

Human resources outsourcing and recruitment process outsourcing (HRO/RPO) is the subject of rising competition from Indian vendors, some of whom are expressing interest in acquiring established brands in the United States. At the same time we see widespread shortcomings in process migration and training by incumbent offshore vendors in this field.

A year ago, I reviewed the outcome of an offshore outsourcing arrangement that a major onshore HRO company had achieved in outsourcing resume screening to a merchant facility in India. The Americans provided inadequate training and support for their outsourcing partner, with predictable consequences. The Americans blame the Indians. I blame the Americans.

Following an acquisition, the risk of inadequate training and support for process migration can be aggravated by financial demands that international buyers place on themselves.

Carrying Double Expenses
Except at the top of the market, South Asian facility owners commonly invest in physical capacity and then hire staff before they arrange for business to fill that capacity. As a result, facility owners come to the table with negative cashflows and seek to shift work offshore as quickly as possible.

The acquisition of a North American outsourcing operation commonly incurs double-cost charges for the buyer, who can expect to maintain overlapping capacity for six months or more after the deal is closed. There will be continuing needs for training offshore staff, even for simple things such as U.S. geography, accents and labor categories. Failure to support offshore staff will result in revenue decreases because of client flight.

The buyer will also need to retain or expand sales operations in the United States, despite internal (offshore) resistance. Wipro and Infosys advertise business development positions in the United States that start out at a base rate of $81,000 per year, plus generous bonuses. Wipro and Infosys have learned that paying 10 times more to American salespeople than to offshore staff makes sense economically. That view is not widely shared among lower ranking Indian competitors.

The role of advisors to offshore buyers is not simply to educate clients on how to make an acquisition in the United States. The role often extends to educating clients on how business is conducted in North America. Roles are reversed for Americans seeking to set up operations offshore.

Anthony Mitchell , an ECT News Network columnist, has been involved with the Indian IT industry since 1987, specializing through InternationalStaff.net in offshore process migration, call center program management, turnkey software development and help desk management.

This would be the 11th acquisition for Aegis BPO in the last three years. In August, Aegis BPO had announced the merger with PeopleSupport for $250 million. This acquisition will give Aegis presence in Philippines and a new business vertical of travel and transport.

Despite the slowdown in the US financial market, Aegis BPO has not seen much of an impact on the business. The company will be focusing on organic growth.

“Our organic growth rate has been around 35 per cent and we expect to have the same for the next year as well,” said Aparup Sengupta, global chief executive officer and managing director of Aegis. Aegis has nine centres in the US, which are outsourcing centres catering to clients in the US.

Around 67 per cent of Aegis BPO’s current revenue comes from the US and the remaining from India.

 ARTICLE

The Essar-owned $330-million Aegis BPO is once again on prowl. It plans to buy four BPOs in a year. Aegis has already acquired 11 companies during last four years.

“We are in talks with over six BPOs and plan to close deals with at least four of them. Our plan is to add a company every quarter as part of our inorganic and organic growth. Cash is not a problem as we have cash-rich Essar Group as our parent,” says Aegis CEO Aparup Sengupta.

The BPO has an internal M&A team that works on a `five nine’s’ strategy when closing an acquisition. “Once we decide to close a deal, we follow a five nine’s strategy, which revolves around completing the integration in 99 days, 9 weeks, 9 days and 9 hours. While the new organisational strategy is charted out in nine hours, both the companies should be integrated within 99 days,” Mr Sengupta adds.

The Essar Group’s buyout spree started in 2003 when it announced buyout of US-based Aegis in November 2003 for $28 million. From about 5,100 staff then, the company now employs over 22,000 people.

In 2005, Aegis bought three BPO companies—Orion Dialog, Customer First and BPL’s customer care BPO. The buyouts added 12 languages and a large domestic BPO offering. In 2007, Aegis gobbled up Gurgaon-based Global Vantedge, which added 1,500 employees and a large collections and receivables vertical to its kitty. The same year it bought Kolkata-based Stesalit Infotech, which added medical transcription to its offerings. It also bought Bharti’s stake in the India JV arm of US-based Teletech India for $13 million last year.

M&A experts also support Aegis growth strategy. “It’s the right time as valuations of BPO companies have rationalised due to a decline in profitability. Captive BPOs also want to exit India. Earlier, we saw GE exiting GECIS and this year, it was Aviva which sold off to WNS,” says Grant Thornton M&A partner Harish HV.

“Quarter-on-quarter growth of many BPOs has been fallen significantly. This has driven down P/E ratios of BPOs from 23 last year to 15, which makes it a good time to buy,” adds offshoring advisory firm Tholons CEO Avinash Vasishtha. This year, Aegis bought Time Warner’s AOL contact centre in India for an undisclosed sum. Last month, Aegis bought Nasdaq-listed PeopleSupport for $250 million, which added large BPO centres in Philippines and Costa Rica and the US to its services model.

The founder entrepreneurs of some of these BPOs were absorbed in the top management. For instance, founder CEO and COO of Customer First Services, Sandip Sen currently acts as the global chief marketing officer for Aegis.

Mohit Soapbox:
The march towards selling non core assets in IT/BPO in India continues. Aegis which has acquired a few firms over the last year continues to grow inorganically. Also it seems like the wave for ‘captives’ in India to be sold to third party vendor continues in full swing. TCS looking at Citi BPO, WNS buying out Aviva, Genpact managing GE money center in South America.

ARTICLE
Aegis BPO Services announced today that it is taking on AOL’s call centre operations in Bangalore, India.

The acquisition, which is expected to close at the end of April 2008, will see Aegis provide customer service and technical support to AOL customers.

AOL call centre employees in Bangalore will then officially become Aegis staff. Aparup Sengupta, Aegis managing director and ceo said this was a defining and historic moment for the company. “We are proud to welcome a team that have built a legacy of superior customer management practices,” said Sengupta.Maneesh Dhir, executive vice president of AOL International, said: “AOL will continue to have a significant presence in India and to strengthen its local operations.”