BPO services provider EXL eyes buys in insurance

BPO services provider EXL Service Holdings is looking to acquire companies in the insurance space as it looks to ramp up its onshore presence in the US. The company is in talks with 12 firms and the acquisition size may hit $200 million. 

“Typically, we have anywhere between 6 and 12 companies on our target which are part of our active dialogue for acquisition, some of them are in Europe and India,” EXL chief Rohit Kapoor told DNA.

He said if the purchase is for $50 million then it would have sales of $30-$50 million with employee base of 100-300 people.

“The US onshore capability is important as most of our customers want us to outsource the processes end to end and nowadays processes are becoming more complex so you need certified workforce,” Kapoor said.

“The vertical which is important to us is insurance, which is the core area of strength for us and we want to go deeper and deeper, we are looking to be a category killer in insurance. What I mean is to have some technology and applications associated for insurance along with subject matter experts,” he said.

The New York-based EXL recently paid about $14 million for the US-based insurance policy administration system maker PDMA, which has 50 employees.

EXL, which is a debt-free company, has $100 million of cash reserves and will generate about $50 million of free cash in 2010 which would be used up for the acquisition along with some debt.
Last year the BPO firm had bid for British software firm Innovation Group for about $200 million, but talks failed. “Our comfort zone for an acquisition is anywhere between $20 million and $200 million, we are looking at couple of assets which are large assets of above $100 million” Kapoor said. 

The company is also expecting at least one new big deal win in Europe from insurance, travel and utility clients. The deal would bring around $5-10 million of annual revenue and deal time line would be 3-5 years.

The company will launch its India business in 2011, especially targeting the insurance clients through the organic route. EXL has 12,000 employees globally and would add 300-400 employees each month in 2010.