Baird Report Predicts Continued Consolidation in $150 Billion Global Business Process Outsourcing (BPO) Industry

Technology-enabled service providers are leading targets for acquirers

LONDON, 5 May 2015 – The $150 billion global business process outsourcing (BPO) industry is likely to see continued consolidation over the next few years. This will be driven by client demand for cost savings, value-added services and emerging technologies, according to a new report from Baird, an employee-owned middle-market investment bank.

In the report, “Transformation of Business Process Outsourcing,” Baird notes that the BPO industry experienced a significant increase in M&A activity with technology-enabled service providers among the leading targets. As the BPO industry continues to evolve, new technology is being introduced at an accelerated rate, partly driven by the parallel transformation underway in the enterprise software market i.e. the shift from on-premise software to the cloud.

Baird expects more consolidation in the BPO industry given the fragmented nature of the market. Both corporate acquirers and private equity firms are building scalable BPO platforms that offer value-added services to their clients.

“Business process outsourcing continues to transform, driven by new business models, disruptive software and more diverse end markets,” said Kiran Paruchuru, Managing Director at Baird. “We expect these dynamics to continue to drive consolidation as companies adapt to meet the needs of their clients.”

The Baird report outlines multiple drivers of growth for the overall BPO market, including:

  • Secular trend to outsourcing –over 70% of relevant services are performed in-house by clients, which translates to an outsourced penetration rate of under 30%; a large untapped opportunity for BPO providers
  • Lower costs – it is inefficient for clients to replicate specialised functions in-house that need significant fixed costs and capital expenditure; cheaper instead to transform the function into a variable expense by outsourcing
  • Focus on core business – clients are continuing to restructure their non-core business operations since the economic downturn to free up internal resources and management time on achieving their core strategic goals

The report covers six BPO subsectors:

    1. Finance & Accounting (F&A), Fund Administration and Fiduciary Services
    2. Governance, Risk and Compliance (GRC) Services
    3. Human Resource Outsourcing (HRO)
    4. Outsourced Customer Care (OCC)
    5. Legal Process Outsourcing (LPO)
    6. Insurance Related Outsourcing

The $10 billion outsourced GRC market is forecast to grow at 20% annually as the post-Lehman regulatory environment becomes increasingly difficult to navigate. Baird’s analysis of 220 M&A transactions shows that the highest valuations were commanded by BPO providers with a compelling growth strategy, technology enablement and attractive financial characteristics.

For a copy of the full Baird report, please go to: Baird Report: Transformation of Business Process Outsourcing

For additional information about this report, or if you would liketo speak to a member of the Baird team, please contact:

Cubitt Consulting
+44 (0)202 7759 1194
   Mike MacMillan
MacMillan Communications
+1 212 473 4442

About Baird Global Investment Banking

Baird is a leading global investment bank focused on the middle market. Approximately 250 investment banking professionals in the U.S., Europe and Asia provide corporations, entrepreneurs, private equity and venture capital firms with in-depth market knowledge and extensive experience in merger and acquisition, debt advisory and equity financing transactions. Since 2010, Baird has completed 354 advisory transactions representing more than $90 billion in transaction value and 523 financings raising $144 billion.

About Baird

Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 3,100 associates serving the needs of individual, corporate, institutional and municipal clients. Baird has more than $145billion in client assets. Committed to being a great place to work, Baird ranked No. 5 on FORTUNE’s 100 Best Companies to Work For in 2015 – its 12th consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. Robert W. Baird Limited and Baird Capital Partners Europe Limited are authorised and regulated by the Financial Conduct Authority. For more information, please visit Baird’s Web site at