2008 M&A Activity in the ARM Industry on Target to Exceed 2007 Results

July 30th, 2008

Despite the fact that only five M&A transactions closed in the second quarter of 2008, the combined deal value of mergers and acquisitions in the accounts receivable management (ARM) industry could exceed last year’s US$1.65 billion. At the end of the first half of the year, the estimated total deal value is $1.43 billion.

At the end of last year, we predicted that transactions in the ARM industry would exceed 2007’s total deal value based on pending transactions we were watching in Europe, and this is indeed playing out.

The largest transaction of the second quarter was Investor AB’s 50 percent purchase of a leading Norwegian debt collection company, Lindorff Group, for US$558 million. This meaningful investment positions Lindorff to capitalize upon significant expansion opportunities within other European markets.

Other notable second quarter transactions involving European debt collection companies include UK-based Exponent Private Equity LLP’s acquisition of Lowell Holdings Limited, a British debt purchasing company, for an estimated US$394 million; and the acquisition of Canada-based Eastern Collection Services Ltd. by the Iceland subsidiary of large European ARM company Intrum Justitia. This transaction marks Intrum Justitia’s entry into North America.

We expect increased interest in North American debt collection firms from European buyers, especially into the U.S. market. Some European companies will seek to leverage additional value from favorable exchange rates. Plus, acquisition multiples being paid for U.S. ARM companies have been generally lower than their European counterparts.

Recently announced mergers and acquisitions in the U.S. include the acquisition of New Mexico agency Collectrite, Inc. by CreditWatch Services, a debt collection agency based in Texas; and the acquisition of MuniServices by Portfolio Recovery Associates (NASDAQ: PRAA) to expand their presence in the government collections arena. The latter deal officially closed on July 1st and is incorporated into the third quarter results.

We anticipate that the number of actual closings will increase in the second half of the year. We are also expecting to see a round of consolidation in the debt purchasing sector of the accounts receivable management market. With financing more challenging for some debt buyers to secure, and liquidations down as consumers fend off rising food and gas prices, some debt buyers are seeking to recapitalize their businesses and may merge into larger, well-capitalized debt buyers.

For the rest of 2008, Kaulkin Ginsberg expects more M&A activity to come from large ARM companies – particularly those that are private equity backed – seeking strategic acquisitions to facilitate growth. This is a great time for well-capitalized ARM companies to increase market share through strategic acquisitions. Private equity firms will also add to the M&A activity in the second half of 2008, seeking to capitalize on the long term trends of increased consumer debt, increased outsourcing to ARM companies, and abundance of debt portfolios available for sale at favorable prices.

Comments are closed.

LATEST BLOGS

Suggestions for my High School Graduate

June 20, 2017

High school graduation is a time of excitement for many as they head off to college. Today, I thought I'd share some of the advice I gave my youngest son in case anyone else has a child preparing to go off to school sometime soon. ....

» see this post    » all posts


ARM Industry Merger and Acquisition Trends

June 14, 2017

Do M&A trends within the ARM industry defy traditional business and economic theories? Today's KG Prime sponsored blog examines industry performance from 2007-present, and the effect changes in operating conditions had on consolidation trends. ....

» see this post    » all posts


The Department of Education Contract: A Candid Discussion between Industry Experts Mike Ginsberg and Randy Kamm

June 13, 2017

The Department of Education unrestricted debt collection contract procurement process seemingly has no end in sight. Industry experts Mike Ginsberg and Randy Kamm examine the current situation, and the decisions that brought us to where we are today. ....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Kaulkin Ginsberg Moves Its Market Intelligence Online

June 8, 2017

Kaulkin Ginsberg is changing the way busy owners, executives, and senior leaders access strategic market intelligence with the launch of KG Prime. KG Prime is a comprehensive and easy to use web-based service that provides users with economic, market segment, and other forms of strategic research.....

» see more




AXIAL FORUM - Publishes "Succession Planning - A Critical Missing Element in Many Family-Owned Businesses"

June 7, 2017

AXIAL FORUM, a web-based strategic mediator for the M&A industry, recently published an article succession planning by Topline Valuation Group. This article was co-authored by members of the Topline Valuation Group and Kaulkin Ginsberg team....

» see more




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