Mouchel Parkman buys HBS for seemingly bargain price

Mouchel Parkman has bought local government BPO player HBS from private equity firm Terra Firma for £46.2m .

Despite beeing loss-making, I still find that a pretty amazing price which represents a PSR of about a third revenues. That's even less than the 50% PSR that UU sold Vertex to PE firm, Oak Hill, in early 2007. And its a lot lot less than the £100m Terra Firma paid for Hyder Business Services - how HBS was previously known - just a few years back. Indeed this is the first time I have seen Private Equity selling their BPO stakes other than in IPOs.

But HBS had a sullied reputation after losing the Bedfordshire CC £260m contract in 2005 although it seemed to be doing a lot better lately. Indeed it had a partnership with Mouchel Parkman in the successful bids at both Oldham BC and the new shared service initiative at Somerset. Clearly the coupling makes stategic sense for Mouchel Parkman.

But it does show that, from an investment viewpoint, BPO is not the 'road to riches' at first thought - except if you are Capita, of course!