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June 29, 2018
martinwolf  Transaction Analysis
Synnex Corporation to Acquire Convergys for $2.8B

Financial Information*
  • Transaction Value                                        ~$2.8B
  • EV/LTM Revenue                                         1.02x
  • EV/LTM EBITDA                                           8.18x
Transaction Facts
  • IT services giant Synnex Corporation (NYSE: SNX) announced yesterday its plans to acquire call center operator Convergys in a cash and stock transaction for a total value of ~$2.8B, including ~$170M of Convergys' outstanding net debt.
  • Under the terms of the agreement, Convergys shareholders will receive $13.25 per share in cash and 0.1193 shares of Synnex common stock for each Convergys common share.
  • The implied price of $26.50 per Convergys share represents an 18 percent premium to the company's unaffected closing stock price on May 10 -- the last trading day before published market speculation regarding a potential acquisition.
  • The deal, which will be accretive after the first year, is expected to generate cost savings of up to $150M over the course of three years.
  • The transaction is expected to close by the end of the 2018 calendar year.
Creation of a Business Process Outsourcing Giant
  • Global Scale: Synnex's Concentrix division, a wholly-owned subsidiary, will complete the acquisition and be integrated into a single business.  Once the deal is completed, Synnex will have an additional $2.7B in sales in addition to a global BPO footprint of 40 countries in total (12 new countries). 
  • Stronger Value: Synnex's move is expected to generate significant returns. While the distribution business  is at risk today, the services economy is continuing to expand. In the BPO market, margins are much higher, due to higher recurring revenue and more intellectual property -- making the value for each revenue dollar that much more desirable. 
  • Right Timing Before the deal, Convergys experienced a drop in sales mostly due to declines in the telecom sector; sales for 2017 were $2.79B, a four percent decrease from 2016. Meanwhile, Synnex reported yesterday in its earnings report that revenue was $4.5 billion, up 30% from the prior fiscal year second quarter. Synnex's operating income was  $96 million , or 2.1% of segment revenue, compared to  $102 million, or 2.9% of segment revenue, in the prior fiscal year second quarter.
  • High-Impact Deals: Synnex differentiated itself from other mainline distributors as an added-value player. The company acquired Datatec's Westcon-Comstor North America and Latin America Businesses for $915M in June 2017 and acquired Minacs for $420M in August 2016. Marking the beginning of this series of strategic buys was its $505M acquisition of IBM's Customer Care BPO Services Business in September 2013 -- the deal instantly placed Concentrix as a top 10 provider in the CRM BPO market, which was valued for over $55B at the time. In addition, the IBM acquisition enhanced Synnex's margin profile significantly -- and the Convergys deal, the company's biggest yet, can be expected to give an even higher boost to its margin profile. Additionally, the product distribution business as a whole may begin trading at a higher multiple soon as an effect of the increased value.
For more information about this transaction,  click here to read the report.

*Financial information from the report and FactSet.

martinwolf was not the advisor in this transaction.

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Headquartered in Scottsdale, Arizona with offices in the San Francisco Bay Area and New York, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 155 transactions in over 20 countries and sold seven divisions of Fortune 500 companies. 


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