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CPA looks to inorganic LPO acquisitions to hit 100% Y-o-Y growth targets

LPO
LPO

CPA Global CFO and head of management services Anand Sharma has vowed that the legal process outsourcing (LPO) company would look for inorganic vertical acquisitions of smaller pure-play LPO companies in 2011.

“We are evaluating various options,” said Sharma. “This year in 2011 we are very, very keen on some inorganic growth also. Particularly in this LSO [legal service outsourcing] market the number of players have increased but consolidation has begun to happen.

“I would say that as a direction, consolidation has already happened last year, like Thomson Reuters and United Lex. Consolidation has started to happen and like in every industry you’ll see emergence of five to 10 big players. I think smaller companies that can’t scale would definitely get subsumed into the whole but consolidation is bound to happen in the next three years in LSO.”

Although strategy had not yet been “frozen” noted Sharma, he added: “This year we are definitely evaluating our options if there are some good companies to buy.”

“Definitely understand that only organic growth will not be the driver we’ll have to look at inorganic growth.”

In January of last year CPA sold a stake valuing it at $440m to UK private equity group ICG. Sharma noted that CPA’s cash reserves were currently sufficient for operations but more was available. “I think we have enough internal cash to be able to sustain our growth but if we ever need to go in for a big bang acquisition – then we can easily seek some funding.”

CPA Global’s revenue currently consisted roughly 80 per cent of intellectual property-related legal outsourcing services, with 20 per cent coming from non-IP LSO or LPO work, explained Sharma.

“This ratio is changing very fast. Our expectation is that we should be deriving equal amount from general legal in three to five years [as from IP],” he said, adding that the growth rate in IP would not slow down. “Our expansion in general legal services is not at the expense of IP… We target to grow 100% year-on-year.”

More than 1,600 staff were employed by CPA globally, said Sharma, with those dedicated to pure legal and particularly US litigation-support work currently numbering 400. “We expect those 400 to become 800 in a year.”

India-based operations housed 150 of those staff with 250 being based in the US, according to Sharma, with US-based clients still preferring for work to be done onshore in the US, although the cost was roughly 40 to 50 per cent lower in India.

CPA would target hiring between 50 and 100 students at the beginning of this year through campus recruitment from the top 15 to 20 law schools for whom the base salaries would start at between three and four lakhs depending on education and experience, said Sharma.

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