ACA of Texas 2015 Presentation: What’s Going on and What to Expect

February 23rd, 2015

Since the Great Recession began in the fall of 2007, the ARM industry has undergone drastic changes. The recession’s effects can still be felt today across the global economy. It’s important to note that although market segments continue to expand and contract, the U.S. still has a vibrant credit economy.

Student Loans90 plus day deliquencyby loan type

In Q3 2014, the U.S. student loan market reached $1.126 trillion, with nearly $125 billion in delinquencies. This market segment was then catapulted into the largest growth market for U.S. ARM companies positioned to reap the benefits.

Now in 2015, President Obama wants to overhaul the student loan market because he believes it is a barrier to economic growth. Pending regulatory changes, such as the Pay as You Earn (PAYE) plan, would allow graduates to cap their repayments at a set percentage of disposable income, followed by total debt forgiveness after 10 years of public service or 20 years in the private sector.

Additionally, the U.S. Department of Education published a list of 11 companies in October 2014 that won contract awards under the small business set-aside on its Default Collection Services contract and private collection agency (PCA) program. Although the program was set to begin in 2015, the Department of Education is behind schedule in awarding these student loan contracts. Some even speculate that the ED will not complete this process until the end of the 2015 fiscal year.

Subprime Credit Card Borrowing is on the Rise

Banks and credit card companies issued 3.7 million credit cards to subprime borrowers during the Q1 2014, a 39% jump from a year earlier and the most since 2008, according to data gathered by Equifax.

Capital One reported about a third of its U.S. credit card balances belonged to borrowers with FICO scores of 660 or lower, or who had no score by the end of the first quarter. Wells Fargo also reported more than $2.1 billion in credit card balances with borrowers whose FICO scores ranged from 600 to 639 in the first quarter, up 9% from a year earlier and 18% from two years earlier.

These trends continued into the second half of 2014, which bodes well for agencies and debt buyers that suffered significant client loss in recent years while incurring escalating compliance costs.

Health Carehealth care

The health care industry is another one that is on the rise as the American population grows older at an exponential rate. It generated more than $2.9 trillion in revenue in 2013. What’s more, health care expenditures are expected to maintain at least a 4% rate of growth between 2013 and 2019.

Starting this year, the baby boomer generation – the largest population group in the U.S. (77.3 million people and nearly 25% of the total population) – will begin retiring from the labor force. On average, people in this age group account for more than 40% of health care spending, and they only comprise 15% of the population now.

The health care industry is expected to grow rapidly to meet the needs of this aging population. Hospitals, senior living centers, doctors’ offices and other health care providers will seek greater support from RCM and ARM firms. This means increased revenue for the health care system and its outsourced contracts, and a boom in services for RCM and ARM companies.third party collections

Third Party Collections

Long-run collection activity by third-party agencies has been improving since 2003. Despite fluctuations during the Great Recession, the average collection amount and percentage of consumers working with collection agencies continues to rise. We expect this trend to continue as consumers embrace the credit economy.

Semi-Annual M&A Deal Tracking

As Kaulkin Ginsberg predicted, annual deal volume continues to rise. Despite the second half of the year being a historically slow period for M&A, the second half of 2014 was especially active. That being said, we expect a strong wave of consolidation among collection agencies and law firms over the next 18-24 months as smaller and midsize service providers find it increasingly more challenging to operate profitability as a stand-alone business.

semi annual deal tracking

The M&A Climate Heats Up

Also on the M&A front, midsize deals abound. In April 2014, United Recovery Systems (URS), a portfolio company of Audax Private Equity, announced it completed the acquisition of Array Services Group. Another notable transaction included Expert Global Solutions (EGS) announcing that it entered into an agreement to sell certain segments of its ARM business to private equity firm Platinum Equity in July 2014.

Transactions outside of the U.S. increased as well. In September 2014, UK debt buyer and ARM firm Arrow Global Group said it will acquire smaller rival Capquest from a private equity fund for £158 million – or $258 million – on an enterprise value basis.

What to Watch for in 2015

Kaulkin Ginsberg anticipates the following will occur this year:

  • More cross-border and international transactions
  • Accelerated debt buyer consolidation
  • An increase in the number of collection agency transactions
  • More mergers among collection law firms
  • Additional alliances among major ARM associations
  • More M&A transactions involving health care providers and service providers
  • Increased interest in ARM transactions from financial and strategic buyers

About Mike Ginsbergmike

Mike Ginsberg is president and CEO of Kaulkin Ginsberg, providing M&A and strategic advisory expertise to the accounts receivable management industry for nearly 25 years. Mike is also co-founder of Topline Valuation Group, providing ARM owners and executives with much-needed technical, financial and benchmarking services designed to improve decisions at the corporate and operational levels.

Mike is a member of ACA International, DBA and the Association for Corporate Growth.  He sits on the advisory boards of several industry associations and publications.

He is a frequent speaker on important industry issues and is often interviewed as an industry expert by the trade, financial and consumer media. Mike writes a regular blog about the industry and maintains the page "ARM in Focus" on

Mike has been the recipient o f numerous industry awards, including the NARCA Don Kramer Award and Collection Advisor’s award for one of the industry’s most influential professionals for four years in a row.

About Kaulkin Ginsberg

Since 1991, Kaulkin Ginsberg has provided value-added strategic advisory services tailored specifically to the accounts receivable management industry and other outsourced business services (OBS) companies. The firm’s client-centric approach covers almost every stage of a company’s lifecycle. For more about Kaulkin Ginsberg, please visit


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