Predictions for 2007; What’s Next for ARM?

2006 ended with the announcement of two acquisitions.  NCO acquired Star Contact, based in Panama City; and, a few days later, West Asset Management sold its near-shore operations in Guadalajara, Mexico, to a newly formed entity.  Near-shore is nothing new.  A lot of attention has been placed on opening near-shore collection operations based in Mexico, the Caribbean, Canada, and Latin America.  Until recently, this was done predominately through internal expansion efforts.  Whether through acquisition or expansion, we strongly believe that near shore expansion will continue.  Although it takes time to establish a presence in another country, even if it is closer to the US than India or the Philippines, clients and larger agencies alike will realize the benefits of utilizing call centers that are established in these regions.

Some more predictions for ’07 and beyond

• Bankruptcy reform had a smaller effect on the ARM industry than anticipated and we do not expect to see any significant changes in 2007.
• I know that I am going out on a limb when I state that consumer debt levels will continue to rise in 2007 and have a positive effect on the amount of new business that is placed with 3rd party agencies or sold to debt buyers. 
• Rate compression in financial services, healthcare and telecommunications will continue until clients realize this has a negative effect on collection performance overall.
• Mortgage delinquencies will increase significantly and debt buyers and contingency agencies servicing mortgage lenders are well-positioned to benefit from this windfall.
• Municipalities will continue to recognize the benefits of outsourcing collection efforts to 3rd party agencies, creating profitable business opportunities for those agencies that are well positioned locally. 
• More hedge funds, with seemingly endless access to capital, will enter the ARM market as funding sources for debt buyers and as owners of large ARM service providers.
• Expect to see lots of executive-level changes in 2007 as a result of recent M&A events as some professionals seek greener pastures and others seek to sow their entrepreneurial oats by starting their own business. 

One more prediction:  take the Jets over the Eagles in the Super Bowl this year!  (Oh well, there’s always next year…)

Mike Ginsberg is President and CEO of Kaulkin Ginsberg Company, where he spearheads all of the firm's advisory business practices. Mike has been a keynote speaker at association meetings and conventions on industry issues such as "When is the right time to sell?" and "The future of the collections industry." He is a member of the board of the Institute of Merger and Acquisition Professionals (IMAP), a member of the Association for Corporate Growth (ACG), and a member of the American Collectors Association (ACA) and Debt Buyer Association (DBA). Mike also serves as an expert witness, and sits on the advisory boards of several industry associations and publications.  More about Mike Ginsberg and Kaulkin Ginsberg Company can be found on www.kaulkin.com.