Way back in 2002, when offshoring business processes was still a relatively new idea, one private-equity firm decided to bet on its future by investing in a fairly small company, which was being sold off by an American insurer filing for Chapter 11. At that time, it was a small news item, largely in Indian newspapers.
Today, that small BPO firm, based in New York and Noida, India, ExlService Holdings, is a listed company with a market capitalization of close to $ 500 million and the private-equity firm, Oak Hill Capital Partners, is arguably the most active private-equity investor in the outsourcing space. EXL Service, which listed on NASDAQ in October last year, has appreciated more than 50% in these three months. Oak Hill, which held more than 49% stake in the company, after the listing, holds close to 38%.
From the four major buyouts announced involving captive units turning third party, Oak Hill has been an investor in three. Apart from just-announced Vertex buyout from United Utilities, where Oak Hill is the lead investor, the firm was also an investor, along with General Atlantic partners in the largest captive BPO sellout so far — that of Genpact, then called GE Capital International Services (GECIS) by its parent GE.
Who is Oak Hill?
Oak Hill is the de facto pioneer of private-equity industry, as it is seen today. Unlike early players like Carlyle and KKR, which gave a somewhat mysterious aura to the private-equity business, and Warburg Pincus, which is also into venture investment, Oak Hill was created by billionaire oilman from Texas, Robert Bass, to leverage the very opportunity that they are active in today. In fact, people who worked with Bass, have created newer firms, most notable being Texas Pacific Group, now known as a turnaround specialist.
The appeal of the idea was so that Microsoft chairman Bill Gates and Nike founder Phil Knight have invested their personal wealth in the funds of Oak Hill. Bill Gates, for example, invested in Oak Hill funds multiple times. Even a large part of Knight’s money is managed by Oak Hill.
Apart from Genpact, Vertex and EXL Services, Oak Hill’s portfolio companies include Bell + Howell, Cincinati Bell, GATX, Oreck, The Container Store, TravelCenters of America. Recently, it also acquired the broadcast media group of the New York Times, which includes nine TV stations and associated Websites for $575 million.
