Support services and BPO giant Serco has taken over Vertex Public Sector for £55.5m in cash. As UKHotViews readers will know, Vertex sold Vertex Private Sector to Capita last September for £40.5m in cash (see Where next for Vertex?).
The deal means we now know ‘where next for Vertex’ – pretty much exiting the UK. It is now left with a smallish (c£50m) financial services operation, primarily made up of the erstwhile Marlborough Stirling life and pensions BPO business. But the vast majority of Vertex's revenue is now outside the UK in the US and the Indian domestic market.
For Serco, the deal is another important bolt-on in its aggressive expansion into true white collar business process services (BPS). Last year it acquired The Listening Company in the UK (see here), and offshore BPO player Intelenet (see here) prior to launching its Global Services BPO operation in early 2012. The Vertex deal will add 3,000 employees to Serco’s UK BPO business, with specialist focus on multi-channel customer service as well as shared transactional services and ICT services. It will also boost Serco’s capabilities in areas such as HR and payroll, revenues and benefits, case management and administration services.
Serco also gets its hands on Vertex’s flagship local government BPO contracts at Thurrock and Westminster councils, which are two of the largest local government BPO deals in the market, as well as smaller central government contracts at the Child Maintenance and Enforcement Commission (CMEC) and Job Centre Plus. Serco expects to be able to now provide additional services into existing local government customers, and give it the scope to win further 'wide-ranging strategic partnerships' such as those at Glasgow (see here), Hertfordshire and Peterborough (see here). Hertfordshire is itself a customer Serco picked up from Vertex (see Serco takes over from Vertex at Hertfordshire).
The Public Sector business being acquired made revenue of £110m in the year to 31 March 2012 and adjusted operating profit of £8m - so a sizeable addition to Serco's UK BPS business. As a result, we expect Serco to jump several places in our BPS rankings next year to become one of the top five suppliers to the UK BPS market. TechMarketView subscribers can see Serco’s current position among its peers in our new SITS supplier rankings UK SITS Rankings – 2012.
For Vertex, this exit from the UK is an admission of defeat - it has struggled to achieve anything of note in the UK for several years. Serco meanwhile goes from strength to strength. We will be meeting Serco's UK management this month, and will provide further analysis of its strategy and prospects to TechMarketView subscribers then.