Wednesday, 01 July 2015 09:41

Contact Center M&A Activity: About to Heat Up?

Written by 

There’s always one tell-tale sign that things are starting to heat up on the mergers and acquisitions front.  I start getting phone calls and e-mails from people at banks and private equity firms looking for free industry information and, usually, information about specific companies in the contact center industry.  The inquiries always come from the same types of people – junior researchers who I’m sure have been told by the senior analysts and bankers to research the market and the companies, and have been given zero budget to do so.  I used to try to courteously tell these junior people that I didn’t work for free any more than they did.  These days I don’t even respond to their inquiries.

The ones who are really persistent will try to get in through the back door by going through companies like Gerson Lehrman Group (GLG) that offer me a token hourly rate to provide data to a client that they are charging thousands of dollars.  I decline those too.

Years ago a colleague of mine from Dataquest was lucky enough to land one of these analyst positions at Bear Stearns while they were still a powerhouse in the mid-1990s.  After several calls from my former colleague asking for information about the telecoms industry I decided to pay him a visit, accompanied by the sales rep I worked with, at the very plush Bear Stearns offices in the San Francisco financial district.

As my former colleague kept trying to pump me for information I was equally persistent in reminding him how I made a living and how much information he could get with an annual subscription to my service.  Finally he got up, shut the door, and said to me, “Look, they pay me obscene amounts of money here because they think I know this stuff.  I can’t go to my boss for subscription money or he’ll find out that I don’t know the market.”  The meeting didn’t last too much longer and I have no idea what eventually became of my former colleague.

This is a roundabout way of getting to the subject of this post, which is my belief that the second half of 2015 will be an active one relative to M&A activity in the U.S. contact center industry.  Fueled by a relatively weak global economy, low financing costs and companies that are sitting on piles of cash, growth markets like the contact center industry look increasingly attractive to investors and companies looking to grow through acquisition.

The first half of 2015 saw M&A activity up 60 percent over the first half of 2014 to reach $988 billion.  This is the strongest first half for M&A activity since records started being kept in 1980.  The average deal in the U.S. was 16 times earnings before interest, taxes, depreciation and amortization.  This is another record breaker.

If this is starting to sound eerily like 2007, right before the bubble burst and the economy crashed, it’s because it is.  The major differences, however, are today’s weaker global economy and cheaper money.  Dollar appreciation may also cause U.S. companies to look at diversifying into offshore markets where their acquisition money may go further.  The wild card in this activity remains geo-political and economic instability, such as the current economic crisis in Greece and burgeoning economic problems in Portugal and Puerto Rico.  For the contact center industry, however, continued growth in innovation and demand for more sophisticated means of customer engagement should bode well in terms of M&A activity for the industry during the second half of 2015.  This could be a busy second half.

Login to post comments