Firstsource Solutions, 24/7 Customer to merge

India’s fifth-largest BPO Firstsource Solutions (formerly ICICI OneSource) and 24/7 Customer, the tenth-largest, are planning to merge themselves in a move which would usher in a whole new era of consolidation in the Indian BPO / ITeS industry.

It is reported that Sequoia Capital is behind this action, which has substantial stakes in both companies. An array of strategic investments has been made in Firstsource by Sequoia, Temasek, Metavante and ICICI. In June 2003, Sequoia had led the $22 mn funding in 24/7 Customer. Firstsource employs over 10,717 people; 24/7 has 5500 people on its rolls.

Read the article in DNA Money.

FirstSource acquires US outsourcing company BPM for $30 mn; sells stake to US-based technology firm Metavante and hedge fund Galleon Partners

BPO company FirstSource Solutions, formerly known as ICICI OneSource, has acquired a Delaware-based healthcare claims’ outsourcing company called BPM and its two wholly-owned subsidiaries MedPlans 2000 and MedPlans Partners for an estimated $30 mn. This is FirstSource’s second US acquisition after it had acquired Account Solutions Group In September 2004.

The acquisition will allow FirstSource to penetrate the healthcare vertical with capabilities in complex claims’ adjudication. FirstSource will now offer clients database management, policy administration, claims processing and complex claims adjudication capabilities.

The company, by virtue of this acquisition, has also acquired a client portfolio that includes six Fortune 1000 companies and adds three centres in Rockford, Illinois; Fort Scott, Kansas and Louisville, Kentucky to its current 17 delivery centres globally which includes 11 in India, 3 in the US, 2 in the UK and 1 in Argentina. The company has a workforce of 9,018 full-time employees and 61 clients as of September 30, 2006. With this acquisition, the US headcount of FirstSource Solutions has risen to 800.

Read The Economic Times and Business Standard articles.

In a related development, the ICICI Group has divested around 19% stake in FirstSource to US-based banking technology solution provider Metavante and US hedge fund Galleon Partners in a pre-IPO placement. Metavante already holds an 11% stake in Firstsource which it had acquired in April last year through a combination of primary infusion and secondary purchase. The deal has been reported at $$75-80 mn; the ICICI spokesperson has confirmed the deal but declined to comment on its size.

Along with group companies ICICI Bank and ICICI Ventures, Sequoia Capital and Temasek Holdings also holds stake in FirstSource. Sequoia Capital has invested $17 mn in FirstSource for 11% stake and hopes to make $60 mn on its initial investment in the company’s upcoming IPO. Temasek Holdings has invested $50 mn for picking 11-12% stake in the company.

Metavante has picked up a 14% additional stake in the company, taking its total shareholding in the company to 25%. Galleon Partners has acquired 5.84%. FirstSource is planning a public issue of 95.6 mn equity shares, including a fresh issue of 60 mn equity shares and 35.6 mn equity shares, to be offered for sale by the ICICI Group.

Read The Economic Times article.