TSA Group could participate in upcoming sector consolidation; strong growth despite COVID-19 – CEO
By Maggie Lu Yueyang.
Originally published in Mergermarket 26 April 2020
- Well placed to participate in consolidation post pandemic
- Not in rush; just as comfortable with organic pathway
- COVID-19 presents opportunities to grow onshore capacity
TSA Group, a leading Australian business process outsourcing (BPO) company, could participate in the upcoming sector consolidation if the right opportunity arises, said CEO Luke Kenny.
The Perth-headquartered company, which provides a range of services including inbound and outbound call centre support, telemarketing, tele-sales and customer care, is receptive to consolidation opportunities and would seriously consider the right ones as it expects further M&A activities in the sector post COVID-19, Kenny said.
The CEO’s view echoes a recent sector overview by Mergermarket flagging that Australian call center companies with local presence will be sought after in the next wave of M&A post COVID-19.
TSA has been approached before to look at competitors that were put on the market, Kenny said. “If the opportunity is right, we will be a participant,” he said. The company has the right facilities in place to support potential acquisition opportunities, given its strong relationship with lender Commonwealth Bank of Australia [ASX: CBA], the CEO said, adding that it also has a good balance sheet.
A potential deal could also involve a range of funding mechanisms depending on the parties involved, Kenny continued. For example, TSA once partnered with a private equity (PE) firm to bid for a competitor, although that bid did not succeed. “We know how to participate; we are very patient,” he said.
The CEO said he receives enquiries from various PE players a couple of times a year in relation to such opportunities. Australia only has a few players at scale in this sector, which warrants PEs to put money in and scale up, he explained. “There is opportunity to create something at scale for Australian businesses located in Australia, and COVID-19 will see that continue,” he said.
A typical example of PE investment in the sector is Probe Group, which, backed by PE houses Five V Capital and Quadrant Private Capital, made a series of acquisitions in a rollup, as reported by Mergermarket.
Coping with pandemic
Meanwhile, TSA is just as comfortable executing its organic growth plan, the CEO said, noting that the company has tripled its client base over the past three years. The novel coronavirus pandemic has presented at least as many opportunities as challenges, he added.
The company has seven locations in Australia, across Perth, Brisbane, Melbourne and Adelaide, as well as one in central Manila in the Philippines, which is closed due to the COVID-19 lockdown, Kenny said. It has around 3,300 employees across those locations, with about 1,000 in the Philippines, he said.
While the company is eagerly waiting to see what will happen next in Manila, it is ramping up operations in Australia to meet increasing demand, he said. “It is business critical to retain capacity to connect with customers at scale from Australia,” he said, noting many Australian clients are bringing work back home to be less reliant on offshore locations and offshore partners.
TSA has so far added about 30% extra headcount since the COVID-19 outbreak and is now looking for extra office space in Perth and Brisbane to accommodate the increasing workforce, he said.
The company also acted early to make sure people could work from home if needed, and in fact has not lost a day or anyone sick across all operations in Australia so far, he said, noting that currently 30% of its workforce is working from home. As a result, TSA has not lost any core strategic client, he added.
US entry to resume
TSA deployed a business development team to New York about a year ago to assess opportunities there, Kenny said. The process was reasonably advanced prior to the pandemic, but had to pause due to the lockdown, he explained.
The CEO said he believes that the process would accelerate once New York is out of this crisis. The company expects to have a small operation running probably three months after restrictions are lifted, he added.
TSA started in 1997 on a singular contract for door knockers to represent Telstra [ASX: TLS] and now still retains the largest telecommunications company in Australia as its client, Kenny said.
The company, which aims to help clients design and execute their customer engagement and experience solutions, usually represents the No.1 or the fastest growing player in a certain market segment, the CEO said. It has clients in sectors including telecommunications, digital and directories, health insurance, education, energy, media, retail, finance and debt management, he added.
Without disclosing specific figures, the CEO said TSA is comparable in terms of revenue generation to Probe Group. Mergermarket reported in 2018 that Probe Group was on track to have approximately AUD 200m in annual revenue.
by Maggie Lu Yueyang in Sydney: firstname.lastname@example.org
Originally published in Mergermarket: https://www.mergermarket.com/intelligence/view/3019877