Synnex Snaps Up BPO Provider, Boosting Concentrix Business

Synnex, aiming to boost its Concentrix global services division, will acquire business process outsourcing company Minacs Group for $420 million, the company announced Monday.

This is the first acquisition since 2014 for the Fremont, Calif.-based distributor, which is coming off its first quarter of year-over-year revenue growth following four consecutive quarters of decline. The deal is intended to increase Concentrix’s capabilities in the automotive industry and boost its marketing and Internet of Things solutions, Synnex said in a statement.

Minacs, based in Oshawa, Ontario, Canada, has U.S. operations based in Farmington Hills, Mich.

[Related: Synnex To Offshore Some Customer Care Work, Close 3 U.S. Delivery Centers]

"Minacs has been able to establish itself as a high-value, unique player in business services," Chris Caldwell, president of Concentrix, said in a statement. "Their investments in IoT and marketing optimization stand out as solutions with growing market demand, which we believe we will be able to leverage across our combined client base."

Concentrix, which focuses on customer care, renewals management, technical support and demand generation, has particularly been an area of focus for Synnex. Throughout the last three years, Synnex has invested in its services unit through acquisitions and facility expansions.

That focus makes sense, according to Leo Bletnitsky, president of Las Vegas Med I.T., a Synnex partner based in Las Vegas. He said the profit margins are much higher for the services side of Synnex's business than they are on its the distribution side, which he said he has been working with for more than 12 years.

’With the deals they make with thousands of companies like mine, … they are probably making two2 points [of margin on product distribution] versus something like 50 points for services. From a profitability standpoint, it is good for them,’ he said.

However, Bletnitsky said that even as Synnex is doing larger deals through its Concentrix business, it still doesn't represent a large chunk of the business.

In 2015, Concentrix reported $1.4 billion in revenue, nearly 10 percent of Synnex’s overall annual revenue.

The acquisition of Minacs will complement Synnex’s 2014 acquisition in of IBM’s customer relationship management (CRM) unit, which was folded into Concentrix. That boosted the unit’s revenue more than 475 percent that year over 2013. For its fiscal 2015 cycle, revenue increased again by nearly 30 percent.

Synnex has been reorganizing Concentrix over the past several months. In Synnex's first fiscal quarter of 2016, which ended Feb. 29, the company laid off at least 868 customer care workers by closing three Concentrix delivery centers acquired as part of the purchase of IBM's CRM business, and offshored the work to lower-cost locations in Central America, South America and Asia.

But in the second quarter, which ended May 31, Synnex added two customer care centers in India and The Philippines. It also announced that Concentrix will continue to add staff to those two sites during the second half of 2016 and into the first quarter of 2017, with about 8,000 expected to be hired during the current third quarter, Caldwell told analysts on Synnex's earnings call on June 23.

Synnex currently employs about 78,000 people worldwide.

During its second fiscal quarter, Synnex's revenue jumped nearly 4 percent year over year, from $3.25 billion to $3.38 billion, beating its expectations by $150 million. That upturn broke a string of followed four consecutive quarters of revenue declines.

Investors reacted positively Monday after news of the Minacs acquisition broke. Synnex stock advanced nearly 3 percent on the New York Stock Exchange, closing at $96.76 a share.

Synnex expects the Minacs acquisition to close late in the current quarter. It also said that Minacs Group CEO Anil Bhalla will stay on and join Concentrix' senior executive staff.

"Across industries, clients can expect our shared vision and strategic scale to help them solve bigger, more complex business challenges," Bhalla said in the Synnex statement.