Acquiring outsourcing companies: Not for the squeamish

The effects of the recession on outsourcing companies have made them attractive targets for acquisition, but with opportunity comes risk. There are distinct differences between the way things are done in say, India vs. the United States, and they can impact the true value of a company.

Shrinking client pools, lack of access to credit and competition from offshore destinations are squeezing some business process outsourcing service providers in the United States. With declining revenues come cheaper valuations. This creates opportunities for other entrepreneurs seeking to expand their outsourcing business quickly through acquisitions.

With opportunities come risks. The best way to address risks is for buyers and their advisors to recognise them and plan their strategies accordingly, as described below. Identification of target markets presents the first challenge.

Market expansion opportunities are increasing at the same time that the outsourcing field is undergoing transformation, thanks in part to its own success. Outsourcing formerly represented a separate, recognisable business field with distinct boundaries.

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