How to Get Top Dollar for Your BPO Company
The BPO industry is growing and evolving quickly as companies adapt to talent shortages, technological innovations and emerging talent pools. As the industry grows, it is attracting strong interest from financial and strategic acquirors alike. Bridgepoint has compiled this new resource to help owners and leaders of BPO companies understand the current market and how to capitalize on it.
What is BPO?
BPO, or business process outsourcing, refers to the growing industry of companies that help other companies augment their staff. The BPO industry is comprised of call centers, telemarketing companies, data entry services, survey services, collection agencies, document management companies, equipment management services and other business activities that are outsourced.
Market Outlook for BPO Companies
The market for BPO companies is strong. With revenue in the industry expected to grow beyond $55 billion in 2022 and an expected CAGR of 8.5%, the outlook for the growth of BPO companies is positive. The appetite for M&A among these companies is growing too, as both financial acquirors and strategics are active in the space to capitalize on synergies, disrupt the market, accelerate innovation and increase market share.
What’s Driving the Boom in BPO Transactions?
According to Bridgepoint’s latest BPO M&A Quarterly Update, financial sponsors are actively seeking BPO companies in niche subsectors who have the potential to disrupt a market that is increasingly becoming dominated by specialization and consolidation. By comparison, strategic acquirors are looking to deploy cash to capture synergies and achieve economies of scale.
“The Business Process Outsourcing industry is constantly changing and evolving,” says Bridgepoint Director and BPO Sector Lead, Chad Gardiner. “We continue to see large strategic companies acquire unique, high growth targets to diversify their service offering, to capture market share and drive innovation. Bridgepoint expects deal volume in the BPO sector to be near record highs as many middle-market BPO owners are looking to capture strong valuations and de-risk their personal balance sheets.”
What Makes a BPO Company Attractive for Acquisition?
In order to best position your BPO company for a sale at its maximum value, your company should have the following characteristics:
- History of revenue growth and strong gross margins
- Strong near-term and long-term growth opportunities for the company
- Strong, unique value proposition which differentiates your company from the competition
- EBITDA of $5 million or more
- Strong KPI performance when benchmarked against peers (as dictated by customers’ KPI preferences)
- Customer diversity/lack of customer concentration: no one customer should contribute to more than 10-15% of your total revenue
- Long-term customer relationships (3-5 year contracts with customers is ideal)
- Large enterprise customers
- Strong track record of winning RFPs (requests for proposals)
- High customer contract renewal rates
- Robust pipeline of prospective customers
- Low customer churn
- Low employee churn at the supervisor level and above
While this list of valuation drivers for BPO companies is thorough, it may not be comprehensive. Bridgepoint’s BPO experts can give you the most relevant and up-to-date advice and market insights when you are ready to sell or raise capital for your BPO company.
If you lead a successful BPO company and you’re exploring a sale or capital raise, contact Bridgepoint’s BPO experts for a complimentary consultation to discuss your company and the current market. Bridgepoint’s experts have guided numerous BPO companies to a successful outcome, and we welcome the opportunity to give you honest, unconflicted advice.
To explore recent market insights in the BPO industry, download Bridgepoint’s complimentary BPO M&A Quarterly Update.