2007 M&A Activity ARM Industry Nears $1 billion

Merger and acquisition activity in the ARM industry has maintained a fast pace through the second quarter, exceeding last year’s deal value year-to-date. There have been 25 transactions with a total estimated deal value of roughly $910 million this year.

The first two quarters of last year saw 28 deals with an estimated total deal value of $790 million, and 2006 went on to set a new industry record of $3.1 billion for the year. However, it wasn’t until the fourth quarter of last year that the new deal value record was set, thanks to two major private equity transactions: the privatizations of NCO Group and West Corporation. We estimate the ARM deal value of these transactions at $1.625 billion.

This year, we predicted that more strategic and financial buyers would enter the ARM industry, or add-on to their current investments, and that is exactly what is taking place.

The largest transaction of the second quarter occurred in May, when West Corporation purchased Omnium Worldwide, for $150 million.

Other significant transactions included the purchase of a 25 percent stake in Encore Capital Group (NASDAQ: ECPG) by investors from J.C. Flowers & Co. and FPK Capital; the $64 million purchase of ARM agency Creditors Interchange Receivables Management, LLC (Creditors Interchange), by Debt Resolve, Inc. (AMEX: DRV); and the $55 million purchase of Nationwide Credit Inc., Atlanta, Ga., by Ocwen Financial (NYSE: OCN).

This is still a very active M&A market. Given our knowledge of activity in the pipeline along with several pending deals, we expect the current pace of transactions to continue throughout the rest of the year.

Michael Lamm manages M&A transactions and valuations for Kaulkin Ginsberg. Michael can be reached at 301-907-0840 ext. 119 or by email.