VANCOUVER — In his two decades at Telus, Jeff Puritt earned a reputation for having an eye for a deal. As head of mergers and acquisitions for the Vancouver-based telecom, he championed the purchase of a majority stake in a Philippines call-centre operator called Ambergris Solutions. It became the foundation of the telecom’s International division, and Puritt became its CEO.

Now spun out from its parent company, Telus International posted its first earnings as a public company this month. The results beat analyst expectations, an early validation of both the telecom’s spin-out strategy and Puritt’s deals-driven plan for growth.

With a post-IPO war chest, the company is now looking for other possible purchases. “I’m not sure if I have a keen eye for acquisitions,” he said in an interview with The Logic, “but … I have a team that have a keen eye for acquisitions.” 

Puritt himself joined Telus as part of an acquisition, the telecom’s 2001 deal for Daedalian eSolutions, where he worked as general counsel and vice-president of corporate development. At Telus, he received “a bit of a clandestine title” of director of finance and administration, but the company expected him to act more like a lawyer than oversee the financial reporting. After renegotiating some legacy contracts, he was put in charge of the Telus Ventures Fund, then became the “professional shopper” at the head of the company’s mergers and acquisitions team. He and his team pushed Telus to buy Philippines-based call-centre operator Ambergris Solutions, establishing a new offshore customer-service division after it acquired a majority stake in 2005. The telecom rebranded Ambergris as Telus International in 2007 and put Puritt at the helm the next year.

As CEO, he has helped turn Telus International into a spinoff that broke the TSX record for aggregate gross proceeds from a tech sector initial public offering. The company raised $1.36 billion in its February IPO after the underwriters exercised their full over-allotment option. Its share price has mostly hovered between $34 and $40, with parent Telus retaining a roughly 65 per cent stake. Earlier this month, Telus International beat analyst expectations in its first public quarterly earnings, with revenue rising 57 per cent and net income falling from US$11 million to US$3 million.

It now has significant funds for M&A. The company spent “a significant portion” of proceeds to repay US$530 million in debt, wrote a J.P.Morgan analyst in a note, expanding its available liquidity to US$768 million, up from a pre-IPO US$285 million.

From the start, the company’s growth strategy has been built on acquisitions. Its “competitive advantage lies in its ability to provide service across the entire customer experience and digital services value chain,” wrote CIBC analyst Stephanie Price in a note. Telus now offers what it calls “end-to-end service innovation,” with the ability to design, build and deliver digital solutions for its more than 600 clients that it serves from 50 locations in over 20 countries. “Acquisitions have augmented organic growth, adding capabilities, scale, and geographic and client diversity,” wrote Price. 

In 2008, Telus International invested in Transactel, giving it customer-experience centres in Guatemala and El Salvador. In 2012, the division invested in CallPoint New Europe, offering it a presence in Bulgaria and Romania. Both rebranded under the Telus International name in 2014. The company then invested in Voxpro and Xavient Digital, expanding its U.S. presence, and rebranded those under its name in 2020.

But “there was some amount of surprise” over Telus International’s most recent deals as they seemed at a remove from its existing operations, Desmond Lau, equity research analyst at Veritas Investment Research, said in an interview. In December 2019, the company announced it was acquiring Competence Call Centre for about $1.3 billion in debt and equity. The move for Berlin-based CCC, with its extensive content-moderation practice, surprised people, Puritt said. But content moderation—which can include checking user-generated posts for graphic content or ensuring a company’s ads run alongside appropriate content—is a service Telus International was already offering to nearly two-dozen clients, he said, and the acquisition “just gave us more breadth and depth, more firepower, more referenceable activities at scale.” 

Lau said content moderation is a growing field and a needed service for not just social media firms, but all companies with an online presence, he said. “There’s so much user-generated content that is being created every day.”

In November 2020, Telus International announced a roughly $1.2-billion deal for Lionbridge AI, a Waltham, Mass.-based company that provides data collection, annotation and validation. Again, the move surprised some, Puritt said, but he believed data annotation—the service of labelling content with descriptive metadata tags, indicating that a photo of traffic includes cars and stop signs, for example, so a machine learning algorithm can process, interpret and analyze the information—was a natural extension of the company’s content moderation business. “From my vantage point, it wasn’t a huge step outside of our comfort zone.”

Puritt’s thinking regarding the most recent deals sheds some light on where he may look for his next. The company’s early financial filings lay out a growth strategy that centres on four pillars, including enhancing its “core capabilities with strategic acquisitions … that expand the breadth of our service offerings, enhance the depth of our digital IT capabilities and accelerate our presence in attractive industry verticals, while maintaining alignment with our culture.”

While Puritt said it’s not good practice to telegraph his shopping list in advance as it tends to inflate the purchase price, he allowed that the team will next look to extend the company’s reach through gaining complementary services, new clients or more talent. It’s unlikely the team will look to purchase something vastly different from what Telus International already does. “I think we want to stick to our core competency and we want to grow incrementally through adjacencies that don’t require that we all of a sudden bite off more than we can chew and take on something completely new and different.”

But an acquisition-based growth strategy can be risky, and one of those risks is Puritt himself. Telus International has a “key man risk,” wrote Tien-tsin Huang, a J.P.Morgan analyst, in one of his notes. Despite his willingness to credit his team, Puritt “is responsible for driving many of the company’s pivots in the past,” Huang wrote. “The CEO leaving the firm would be a major blow to stock sentiment, in our view.”

Execution is also a risk, notes Huang. For example, along with CCC and Lionbridge AI came more than 9,000 employees, presenting a possible culture clash that could lead to employee and client attrition. Overpaying or misjudging future growth potential can also be problematic, said Lau. For example, humans, not computers, do most of the content-moderation and data-annotation work at CCC and Lionbridge AI, respectively. While Lau doesn’t believe those jobs will be automated in the next few years, if it happens, their acquisitions could prove a costly mistake. “If you paid a lofty multiple, and part of that multiple reflects the expectation of being able to continue to grow for several years down the line, but then with AI you don’t get that growth, then you’ve basically just destroyed a lot of shareholder value.”

So far, though, the company seems to be deemed a success both by analysts and internally. Its parent Telus plans to use its trajectory as a blueprint for taking two other of its divisions public: Health and Agriculture. “Investors can draw inference from what we have done at TI as it relates to what we intend to do prospectively with Telus Health and Telus Ag,” said Darren Entwistle, Telus CEO, during a conference call with analysts at the company’s latest quarterly earnings release. “And we feel that the best way that we can have a TI-like outcome is to focus on the core principles of profitably scaling the businesses that we are building with a level of strategy, operational execution and competitive differentiation that investors will find very meaningful, and earning our way, if you will, to an IPO, if that’s where we want to take the businesses in that regard.”

Puritt is proud to lay the groundwork for the other divisions. “This is an, I think, unambiguous, unassailable success story for Telus,” he said, and when a company can unlock this kind of incremental shareholder value, it unsurprisingly wants to repeat it frequently.