Overview:
On 12 April 2021, Baring PE-backed Coforge announced that it will acquire SLK Global, a BPM and digital solutions provider for the financial services sector for $195m.
This acquisition expands Coforge’s BPM operations in the Northern American financial services sector by the addition of several marquee clients including 2 of the world's top 10 banks, 10 insurance companies and several other Fortune 500 companies. It also creates a new top 5 global client for Coforge in one of their core verticals, financial services.
About Coforge:
Headquartered in New Delhi, India, Coforge is a global IT services provider with over 11,000 technology and process consultants worldwide.
About SLK Global:
Founded in 2001, SLK Global is a business process transformation enterprise. It is a quasi-captive for Ohio-based Fifth Third Bank.
Its services include customer support, contact center, analytics, strategic value assessment, end-to-end solutions, business transformation, compliance, quality control and document processing.
It reported a revenue of $62m in FY 20(1) and is expected to record $73m in revenue in FY 21(1) with c.49% revenue from mortgages, c.40% from banking and c.11% from insurance verticals. The company has 3-year revenue CAGR of c.17%.
Headquartered in Bengaluru, India it has over 7,000 employees with delivery centers in Pune and Kolhapur in India and in Metro Manila in the Philippines.
Transaction overview:
The transaction will be completed at an enterprise value of $195m, representing an EV / Revenue multiple of 2.6x based on FY 21(1) estimated revenue.
It will be funded through a combination of retained earnings and external borrowings via NCDs.
Coforge will initially acquire 60% stake in SLK Global, with the founders completely exiting and First Third Bank’s stake being reduced to 40%. After the completion of two years, Coforge will acquire an additional 20% stake from First Third Bank.
As part of the transaction, Fifth Third Bank, the largest customer for SLK has committed to remain a significant customer with a base volume commitment over 5 years starting FY 22(1).
The acquisition will deepen Coforge’s expertise in the banking and insurance segment and provide opportunities to cross-sell its cloud and digital solutions to SLK Global’s customers.
SLK Global will be EBITDA margin accretive to Coforge immediately.
The Chesapeake Group was not an advisor in this transaction.
(1) YE: Mar