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IN THE second-largest takeover of an overseas business process outsourcing (BPO) firm by an Indian company, Firstsource Solutions has announced the acquisition of US-based MedAssist for $330 million. This is the third acquisition for Firstsource in the US, and its seventh in all.

The news drove up Firstsource shares nearly 10% to Rs 79.40 on BSE.

With revenues of $99 million in 2006, Louisville, Kentucky-based MedAssist is among the largest firms providing revenue cycle management services to the healthcare sector in the US. The buyout will give Firstsource a footprint in the hospital side of the healthcare business.

The deal values MedAssist at 12.5 times its 2007 operating profit, Firstsource CFO Rajesh Subramaniam said. MedAssist’s revenues have been growing at 7-10% annually, and its core earning margins are higher than most US firms at 22-24%. “We see significant opportunity to grow our business in the segment by cross-selling our services to MedAssist’s customers,” Firstsource managing director and CEO Ananda Mukerji said.

Firstsource already offers insurance claims processing for the healthcare sector, and acquired US based BPM earlier this year. In 2004, it had bought Accounts Solutions Group, a third-party credit card collection firm. Its acquisitions outside the US include Customer Asset, FirstRing, Pipal Research and RevIT. However, all these acquisitions were for less than $50 million each.

At approximately three times MedAssist’s 2006 revenues, the valuation is on the higher side, an analyst said.

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