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Convergys to Acquire Intervoice for $335 Million
The move deepens Convergys' footprint in an increasingly competitive customer service market, according to company executives.
Posted Jul 16, 2008
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Looking to expand on a relationship management strategy disclosed in Fall 2007, Convergys, a Cincinnati, Ohio-based provider of customer care and billing services, has announced today that it will acquire Dallas-based voice systems provider Intervoice for $335 million, or $8.25 per share. According to information released by the company, the deal is targeted to officially close in the third quarter of this year.

A Convergys statement also reveals the $8.25 per share price "represents a premium of 24 percent to Intervoice’s closing stock price on July 15, the last trading day prior to the announcement of the agreement." Mike Betzer, senior vice president of relationship technology management at Convergys, says the company plans to officially close the deal by the end of August. Asked about the decision to purchase Intervoice outright as opposed to entering a strategic partnership, Betzer explains it's all about long-term commitment and stability. "Customers want to be able to buy products from strategic partners and suppliers they can count on for years and years," he says. "Partnerships could get dicey. We believe there is a tremendous amount more synergy by owning the assets." 

Owning these assets, Betzer says, will allow Convergys to ensure that Intervoice will mesh well with his company’s customer management capabilities. "By integrating Intervoice’s complementary speech automation, Web self-care, and mobile applications, Convergys will be able to offer a comprehensive array of automated and live agent services," he says. "Intervoice’s products and services portfolio provides [Convergys] with an expanded offering, reduced time-to-market, and enhanced differentiation in the large and growing automated services [industry]."

Convergys also receives from Intervoice all 5,000 customers and approximately 700 employees. Betzer says that only "a couple of dozen" of Intervoice customers overlap with the company, and that the commonality is largely in name -- not technology offerings. According to him, there are also no plans to reduce Intervoice’s current staff. "There is very little corporate overlap," he explains. "This acquisition is about growth, not about consolidation. We need [Intervoice employees] to keep doing their jobs, as they do them very well." Betzer adds Convergys has every intention to maintain Intervoice’s current product portfolio. He adds that he aims to have a definitive product roadmap by the official deal close in Q3 2008. 

According to information disclosed during a conference call this morning with representatives from both Convergys and Intervoice, talks between the two parties originated one year ago. Robert Ritchey, chief executive officer of Intervoice, revealed on the call that his company had also been in talks with other vendors about a possible deal -- "We talked to quite a few companies during this period of time," he said, though he disclosed no names -- but in the end went with Convergys. "Several other active bidders engaged with us, but Convergys really buckled down, got the deal done, and we’re very happy with where we’re ending up here," Ritchey added.

According to several industry analysts, the deal offer's each vendor great potential to complement the other’s offerings. "The acquisition addresses some of the challenges we saw for Intervoice, predominantly around scalability," says Gartner Research Director Steve Cramoysan. "For Convergys, there’s some key scales and capabilities which I think they will need going forward, and Intervoice brings some of those to them," he added, citing the area of voice self-service in particular.

The devil, however, is in the execution of the deal, Cramoysan says -- a sentiment echoed by Daniel Hong, lead analyst of customer interaction technologies at Datamonitor. "It won’t be easy," Hong says. "Convergys says it's a solution company, but it still has to overcome the mindset of being a services [vendor] acquiring a product company. It will have to keep an open mind when integrating Intervoice." Betzer stresses that Convergys is taking great care to ensure that the integration process is as smooth as possible, explaining that there are teams from both companies specifically devoted to integration. 

Matthew Goldman, a Gartner research vice president, says only time will tell if Betzer's hopes pan out for a smooth unification process. "Look at mergers in this marketplace -- there are challenges when you talk about human assets," he says, noting the move to include all of the approximately 700 Intervoice employees. "If you look at Convergys’ history in their effort to grow and expand services, they have an understanding of how to align and manage people as part of its own service and part of the organization. How quickly [Convergys] addresses these challenges [in the next few quarters] will be quite telling."

Looking ahead, Betzer says Convergys is extremely focused on making sure this integration with Intervoice is complete before considering any other moves. "The plan is to take a break on the acquisition front and make sure this one is done the way our customers want," he says. While a product roadmap will not be available until at least the end of August, he says the largest move in the short term is to keep both Convergys and Intervoice customers happy while putting future plans in place. "Next week we will start to work through our organizational structure [groups] and come together from a team perspective in order to develop an overall structure and product roadmap," he says.

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