GE’s BPO units attract PE backing

General Electric has sold a 60 percent stake in its Indian business processing operation to US private equity houses General Atlantic and Oak Hill for $500m.

Connecticut-headquartered General Atlantic Partners and Texas-based Oak Hill Capital Partners have teamed up to acquire a 60 percent stake in GE Capital International Services (GECIS) for approximately $500 million (€385 million).

General Electric (GE) will retain a 40 percent stake in the global business processing operation (BPO), headquartered in India. The two private equity houses will evenly split the equity interest in the company between them.

Established in 1997 to provide internal business support for GE, GECIS employs more than 17,000 professional staff and provides operating capabilities to almost 1,000 business processes across GE’s 11 business units.

IT venture capital firm General Atlantic already has a track record in investing in BPO-related opportunities. In 2002, the firm committed £160 million (€229 million; $297 million) to UK BPO company Liberata and followed it up with a £100 million commitment to London-based outsourcing company Xchanging.

Commenting on the transaction for Oak Hill, managing partner J. Taylor Crandall said in a statement: “GECIS is a powerhouse organisation that is well capitalised with an expanding footprint.”

General Atlantic was established in 1980 and has in excess of $5 billion under management. The firm’s biggest investor is American International Group, which contributed $1 billion in 2000. In July, the firm promoted Abhay Havaldar to partner in the firm’s Mumbai, India office.

Oak Hill, founded by Robert Bass, is currently investing from its most recent $1.6 billion buyout fund which it raised in 1999. The firm recently celebrated distributing $1 billion from the fund to investors, following the sale of Canadian automotive company Progressive Moulded Products.

India is proving to be an attractive proposition for private equity investors. UK-based private equity investor Actis is reported to be in advanced stages of clinching a number of MBOs over the next six months.

In another sign of locally active practitioners expecting greater activity in the future, Newbridge Capital, a leading investor in the region, has recently expanded its team. The firm recruited Tim Dattels as a managing director and John Olds as a senior advisor, taking the number of senior professionals to nine.

Limited partners also looking at India with intent. California pension giant CalPERS recently announced that it is looking to increase the $100 million allocation it has already made to the subcontinent.

Global buyout house Warburg Pincus has also invested in the Indian BPO market, when it acquired a 70 per cent stake in Speedwing World Network Services, the BPO subsidiary of British Airways in 2002.