Convergys the Next Takeout Target?

Convergys (CVG Quote) could be the next obscure telecom name to be swept up in the private-equity buyout boom.

Monday's $24.7 billion takeout of Alltel(AT Quote) by TPG and Goldman Sachs(GS Quote) has investors scouring the telecommunications sector for possible targets. Some are looking closely at telecom and cable-billing and support-systems stocks, which bulls say boast strong cash flows and solid growth potential.

While Alltel is a big company by market capitalization, it's hardly a household name. In that regard it's similar to some of the other names being mulled over by telecom back-office bulls. They see Amdocs (DOX Quote), CSG Systems(CSGS Quote) and Convergys on the private-equity radar.

These companies are similar in their low profile but solid buyout fundamentals to some other recent takeover plays, including First Data(FD Quote) and Alliance Data Systems(ADS Quote). Kohlberg Kravis agreed last month to buy First Data for $29 billion, and Blackstone earlier this month agreed to fork over $7.8 billion for Alliance Data.

Amdocs, which provides billing and other services for telecom companies, jumped 6.5% Monday on buyback chatter tied to a possible takeover by possible strategic investors including International Business Machines (IBM Quote) and SAP (SAP Quote).

Also jumping were wireless plays Rural Cellular(RCCC Quote) and Dobson(DCEL Quote), though some observers caution the Alltel deal was an unusually appealing situation for private equity buyers, given that the company has been for sale for years and carries a light debt load.