Dimension Data sees strong prospects for BPO expansion in Canada with Millennium 1 acquisition

Millennium 1’s executives have all signed on long-term with Merchants, Dimension Data’s subsidiary, and the plan in Canada is to build on Millennum’s rapid expansion by growing the business in verticals where Merchants is strong.

Tom Band, Millennium’s CEO

Global solutions and services provider Dimension Data, and its contact centre subsidiary Merchants, have acquired Toronto headquartered Business Process Outsourcing [BPO] Provider Millennium 1 Solutions. The acquisition, from the California-based private equity firm The Gores Group, was for an undisclosed sum.

“The Gores Group acquired us in May 2013, but our heritage actually goes back 40 years,” said Tom Band, Millennium’s CEO, who will remain Millennium CEO going forward. “The business Gores acquired was a corporate carve-out from Davis and Henderson. Davis and Henderson were focused on financial services, especially in the Fintech market, and the BPO assets were no longer strategic to them. When Gores acquired us, we were doing $55 million in top line revenue. Now we are just under $100 million. In a Canadian BPO market that grows about 6 per cent a year, this was almost double the growth.”

Band said that Millennium has experienced this success through a very focused strategy.

“We went after very specific markets that were underpenetrated in BPO, such as financial services, insurance and retail loyalty ecommerce sites. They were underpenetrated because they are highly  regulated industries and most BPOs in Canada didn’t carry the certification needed to support them. We do.”

Band said that the great deal of thought that went into building Millennium’s personnel roster also assisted them enormously.

“When we started this, we determined that to provide customers with strategic business insights, you need to have on your roster of employees people who come from the industries you serve,” he stated. “So we built a bench that looks a lot like our customers, which has helped us to create very compelling offers for them. We have also have propagated performance execution since our launch, which is necessary in this sector to get confidence in our brand.”

Millennium’s customers are all Canadian-based.

“We are national in scope, with five Canadian sites and one site in the Philippines in Manila that does credit card and retail loyalty voice and e-commerce support,” Band said.

A new ‘Merchants Group’ holding company will be formed which will include both Merchants and Millennium.

George Todd, CEO, Merchants Group

“Merchants was started in 1981 in the U.K., and was acquired by Dimension Data in 1997 to be a complementary asset to the contact centre technology that was a large part of their offering,” said  George Todd, Merchants’ former Managing Director, who has been appointed CEO of the expanded Merchants Group, with a new Managing Director for Merchants to be appointed in due course. “We positioned the business in South Africa around 2000, and basically started the BPO industry in South Africa. No one else was doing it, certainly not to our scale. We were the major player in South Africa for a while, but that market has become more competitive as the big global Tier 1s have become interested. Still, we have grown revenue by 40 per cent and seats by 80 per cent over the last 4 and a half years.”

Before the Millennium acquisition, Merchants had no presence at all in North America.

“North America is the largest market for Dimension Data, so for us not to have a complementary offering here has been a weakness,” Todd said. “We started looking two and a half years ago.”

Todd said that while Merchants did look at other candidates to acquire, and dug deep on one or two, Millenium was by far the best fit.

“We were looking for a real culture fit, a company that prioritizes relentless delivery through its people,” Todd said. “That’s not the norm in the BPO industry. We ourselves have been certified as the top BPO in South Africa for six years in a row. Our strengths are in telco, airlines, and Internet services, and we also wanted a company that was strong in areas where we were not. In South Africa, the banks and insurance companies tend not to outsource. In contrast, five of the last six credit cards issued in Canada have had Millennium as their end-to-end service.”

Band said that The Gore Group was looking to sell Millennium, and that Merchants was Millennium’s preferred candidate to acquire them.

“Gore’s hold period typically is five years, during which we materially transformed both the top line and bottom line performance,” he said. “Because the hold period has reached its typical term, it was the right time to initiate a process. There were other potential acquirers. But we were in the same position as Merchants in wanting to do the deal with them.”

So what will change going forward for Millennium and its customers? In a word: nothing.

“It will look exactly as it does right now,” Todd said. “Dimension Data has a rule of buying good businesses and not breaking them. If you go in and try and change things, you are looking for trouble. The entire Millennium team is coming across, and have signed on long-term, so clients will see the same high quality delivery as before. Not a single job will be lost in South Africa either as a result of this.”

Todd did indicate some medium-term goals.

“We are looking to take the things that each do really well within this new structure, and move them into the other’s markets, which in Canada would mean building a presence in telco, airlines, and Internet services,” Todd noted. “We know that that will take some time, however.”

In addition to expanding the Canadian and South African businesses through mutual cross-pollination, the plan is also to use Millennium to drive into the U.S. market, in the medium to long-term.

“We will be looking for U.S. beachheads, and this is the first step in expanding into other geos,” Todd stated. “Long term, we want to make Dimension Data a global powerhouse in BPO.”