Branching Out: Debt Purchasing Firms Expand and Diversify

March 10th, 2006

By Patrick Lunsford
Senior Editor, insideARM.com

As the industry rapidly matures, major debt purchasing players have been diversifying their corporate interests, service offerings, and even portfolio purchases. Successful debt buyers have become tremendously efficient in their core competencies and are now looking to expand their universe in search of increased returns.

Most of the M&A activity among debt buyers in the past few years has focused on bolstering core services.  Portfolio Recovery Associates (PRA), for example, purchased a skip tracing firm, IGS Nevada, in October of 2004.  There have been a couple of deals in 2005, however, that were executed to expand into additional market segments.

In August of 2005, PRA acquired government collection and service provider Alatax.  PRA gained a strong foothold in the high-growth sector of government collections.  In the deal announcement, PRA’s CEO, Steve Frederickson, commented, “Alatax represents an important investment for Portfolio Recovery Associates, providing us with entry into the large market for government accounts receivables management and creating yet another growth engine for the company.”

A new regulatory landscape was the impetus for a much more recent deal.  In early February 2006, Asta Funding announced the purchase of VATIV, a firm that provides bankruptcy and deceased account servicing.   While the company stated that the acquisition would help them to expand and diversify their service offerings, they also directly mentioned the Bankruptcy Reform Act of 2005 in their announcement.

The diversification trend is not limited strictly to M&A activity.  West Asset Management (WAM) announced a major purchase of distressed healthcare receivables in late January 2006.  The portfolio purchase itself was hardly major news.  But included in the announcement was an official launch of a new “Cash Acceleration Program” aimed at healthcare providers.  Under the program, WAM is offering a comprehensive healthcare receivables sales solution to hospitals and doctors, including options like forward-flow agreements and increased information sharing.  Also in the news release, WAM revealed that it has a 550-seat collection center in Texas dedicated solely to healthcare accounts.

Even traditional portfolio purchases have signaled a focus on expansion lately, if not diversification.  Encore Capital bought a $2.9 billion credit card portfolio from a CompuCredit unit in June of 2005.  Along with the portfolio, Encore landed a 120-seat collection facility in Minnesota and an agreement to purchase an additional $3.25 billion in face value of fresh credit card charge-offs.  And this was all in one transaction.

In an exclusive interview with PRA CEO Steve Frederickson last week, he told CollectionIndustry.com (now insideARM.com) that his firm did have expansion and diversification on its mind.  His words perfectly sum up the position of many of the leaders in the debt purchasing community:  “We view ourselves as an accounts receivable management firm in the broadest sense.  So over time, we would like to be able to service many — if not all — of the segments of the industry, whether we develop that capability from scratch, acquire a foothold by hiring a management team, or acquire a platform outright.” PRA has been very smart about acquisitions in the past, and Frederickson reiterated that point in the interview.  But it is clear that the major players in the debt purchasing world, the ones that have already had a high level of success doing what they do best, are looking to expandand diversify their offerings to facilitate even more growth.

For more news and information, please visit our debt purchasing section on insideARM.com.

Comments are closed.

LATEST BLOGS

New York State Now Offers Free College Tuition: The Potential Beginning of a Major Nationwide Trend

April 27, 2017

The Department of Education contract for debt collection services is one of the most lucrative and sought after contracts today by ARM companies. However, state-level legislation like The Excelsior Scholarship could have profound effects on the student loan market.....

» see this post    » all posts


Non-Employment Index: An Alternative Employment Stat

April 26, 2017

The U.S. unemployment rate is a popular measure for looking at the health of the U.S. economy, but alternative measures like the non-employment index may provide even greater insight. In this blog, Kaulkin Ginsberg's analysts examine the strength of the U.S. economy using this alternative measure and its relation to the ARM industry.....

» see this post    » all posts


Healthcare: The Ever-Growing Industry

April 25, 2017

The healthcare industry is one of the most widely analyzed industries in the US due to its seemingly never ending growth. As such, it's no surprise the ARM industry is so focused on the potential impact of a repeal and replace bill for the ACA. ....

» see this post    » all posts


RECENT ANNOUNCEMENTS

ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" in its Winter 2017 Magazine

March 16, 2017

The ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" by Kaulkin Ginsberg in its Winter 2017 Magazine. Kaulkin Ginsberg details its belief that the growth in patient lending and financing programs, clinical integration networks, and physician quality reporting systems for the Centers for Medicare and Medicaid Services (CMS) could have profound effects on companies focused on servicing healthcare providers in 2017 and beyond.....

» see more




ACA of Texas Publishes "M&A Trends in the U.S. ARM Industry" in its Winter 2017 Magazine

March 15, 2017

The ACA of Texas Publishe "M&A Trends in the U.S. ARM Industry" an article by Kaulkin Ginsberg in its Winter 2017 Magazine. This article examines the key trends and developments driving M&A activity in the U.S. ARM industry by market segment.....

» see more




Mike Ginsberg Leading Panel Discussion at DBA International 20th Anniversary Conference

February 1, 2017

Mike Ginsberg, President and CEO of Kaulkin Ginsberg, will be speaking in a panel discussion on Trends in Debt Buying on Wednesday, February 8th at the DBA International 20th Anniversary Conference in Las Vegas, Nevada....

» see more