2006 ARM M&A Deal Value on Course to Double Last Year’s Record

This year may very well set the deal value record for decades to come, according to Kaulkin Ginsberg, a strategic advisory and research firm that tracks the Accounts Receivable Management (ARM) industry. “M&A activity is phenomenal for this industry, which has already been experiencing a period of record growth,” said Mark Russell, Director of the firm’s Strategic Advisory Group. “Last year was the second consecutive year of record-breaking total deal value, but if all the pending and announced transactions close as expected this year, the total estimated deal value could reach $3.5 billion – that’s double last year’s all time high.”

In the 3rd quarter of 2006, activity was characterized by international deals, as nearly half of the transactions completed took place outside the U.S. Of the 22 deals that closed, 5 were completed in Australia, 3 in the U.K., and one each in Canada and India. “ARM is a growth industry on a global scale,” said Russell, noting that more businesses worldwide are outsourcing or selling their debt and consumer, commercial and government debt levels are continuing to rise. “This is attracting interest in the market from strategic and financial buyers worldwide – especially private equity,” he noted. “In the current marketplace, private equity firms have a lot of investment capital, and well-run ARM companies represent a golden opportunity for many of them.”

In Australia, Trans Tasman Collections made two acquisitions with backing from Allco Equity Partners and Deutsche Bank Capital Partners, acquiring Baycorp Advantage Collection Services (ASX.BCA) in early July for $74.3 million, and then a small stake in Collection House (ASX.CLH) in late September for $2.75 million.

NCO Group (NASDAQ:NCOG), which created a stir earlier this year when CEO Michael Barrist announced plans to buy the company with One Equity Partners for $1.26 billion, has not stopped its own acquisition strategy. In July, it closed a deal to acquire a 75% stake in Australian Receivables Limited – part of the firm’s strategic plan for global expansion.

Another notable 3Q deal was National Bank Financial’s (NBF) acquisition of a majority stake in Credigy Solutions. NBF is a subsidiary of National Bank of Canada, one of the largest banks in Canada. Credigy Solutions is a debt purchasing and receivables management company with operations in the U.S. and Brazil.

The estimated total deal value for completed transactions in the quarter is $536 million; however Kaulkin Ginsberg estimates that there is over $1.6 billion in deal value represented in several pending transactions, which are slated to close this year. If these deals close as anticipated, 2006 could reach $3.5 billion – a historic high in total deal value.

CollectionIndustry.com is an affiliate company of Kaulking Ginsberg Company.