M&A conditions continue to improve
July 8, 2010: Rockville, MD – It remains an active market for mergers and acquisitions in the accounts receivable management (ARM) industry overall according to Kaulkin Ginsberg, the industry’s leading M&A and strategic advisory firm. In Q2 2010, there were 11 announced transactions with a total deal value of nearly $700 million – compared with 9 deals valued at only $143 million at this point last year.
The major increase in deal value is due to two large transactions that closed this quarter;
Philadelphia-based Radian (NYSE: RDN) divested its entire stake in Sherman Financial, the
largest debt buyer in the world, for $172 million in cash. Radian had received a dividend
payment of $28 million from Sherman in April. Radian, which also announced an offering of its own stock, has been trying to raise capital as the fallout from the mortgage collapse continues. The other transaction was with a large ARM player which was recapitalized by a private equity firm.
Q210 deal activity continues to be driven by industry and strategic buyers, similar Q2 2009 deal activity in the first half of the year was predominately large ARM firms acquiring smaller ones. Of the 11 transactions completed in Q210, only two involved a financial, Duke Street Capital acquiring Marlin Capital in the UK or a strategic buyer, Aditya Birla acquiring Bureau of Collection Recovery – the rest were industry buyers, defined as larger ARM companies, former owners, or current/former executives. 35% of the deal volume in Q2 10 involved a healthcare ARM firm acquiring a healthcare ARM firm to expand into a new geographic area or add an additional service offering.
“M&A activity certainly picked up this quarter and we see this trend continuing for the remainder of the year,” said Michael Lamm, Associate at Kaulkin Ginsberg. “We are seeing a strong level of seller and buyer interest, but buyers are still concerned about the sustainability of future liquidation performance and how a double dip recession may impact the ARM industry. With this continued economic uncertainty, Lamm expects that buyers will continue to use the form of deal structure such as earn-out’s retained equity and seller’s notes to bridge valuation gaps to get transactions completed.”
Looking ahead to the rest of 2010, Lamm believes that we need to pay close attention to what will be impacting future liquidation performance, specifically the key barometer to this industry, the unemployment rate. We need sustainable job growth/creation to continue our road to recovery. Additionally, he expects capital gains to increase in 2011 which will drive some ARM companies to consider an exit before year-end rather than be faced with a bigger tax bill in 2011.
Contact:
Michael Lamm
Tel: 240-499-3808
mlamm@kaulkin.com
About Kaulkin Ginsberg
As the leading strategic advisor for the accounts receivable management industry (ARM), Kaulkin Ginsberg has completed over 130 M&A transactions valued at over $3 billion. Services focus on analysis, growth, and exit strategies for ARM companies. Kaulkin Ginsberg’s media division is the worldwide leader in providing timely news and insight on the recovery of debt in all industries. Read more about Kaulkin Ginsberg at www.kaulkin.com.