Capita buys up firm DWP outsources work to

Outsourcer Capita may end up a bigger player in the public sector market after acquiring rival Ventura for £65m in cash.

The move will see the firm adding 8,000 extra staff currently based at Ventura's UK offices in Yorkshire, Cardiff, Milton Keynes as well as Pune, India, where it has a 1,500 seat call centre. The deal - Capita's largest in people terms to date and only two months after it bought Bristol-based Call Centre Technology - brings the company's total headcount to 45,000.

Commenting on the deal, Paul Pindar, Capita's chief executive, said, "Ventura's flexible service model complements our established customer contact operations, which are integral to many of our long-term contracts and businesses. It also provides us with opportunities to offer wider customer management and back office outsourced services to key, blue chip clients across additional industry sectors."

The aim was to provide an "enhanced customer management proposition" on top of its existing admin and professional support services. This proposition, the firm's telling the City, would include customer acquisition and sales, help and information lines, technical support and emergency response services and be offered on a flexible or long-term basis.

For its part, Ventura saw sales for the year ending 31 January 2011 grow by 7.5% to £156m, on a pro forma operating profit of £8m compared with £741,000 in 2010. This means Capita paid the equivalent of 0.4 times its revenue and double that proportionately pro forma operating profit for it, ratios which John O'Brien, an analyst at TechmarketView, deemed "reasonable".

He also believes Ventura was the UK's second largest customer management-led BPO provider behind Vertex, which turned in revenues of £260m. "Capita was further down the list - hence the desire to beef up in this area. But combined with its existing customer management activities, including those of CCT, Capita could well now leapfrog Vertex into first place in the UK customer management services market," O'Brien said.

Moreover, Ventura gave Capita an "impressive" list of mainly UK private sector customers, including its former parent Next, O2, Orange, British Gas, Tesco Bank, Sky and British Midland. But as one of Ventura's largest public sector clients is the Department of Work and Pensions, on behalf of which it ran the pension credit application line.

This is one of the few areas in the public sector that can be considered hot right now as the Government looks to make further pension reforms. With the additional capacity at its disposal, Capita should be well placed to benefit," O'Brien predicts.