ASK THE EXPERTS: Are European ARM Companies Interested in Buying U.S. Firms?
insideARM is launching a new feature called Ask the Experts, an interactive section that will allow readers to ask direct questions to the experts at Kaulkin Ginsberg, the leading strategic advisors to the accounts receivable management industry, and parent company of insideARM.
Our first question came from a reader and was answered by the merger and acquisition team at Kaulkin Ginsberg.
Question: Are you seeing increased interest in M&A in the accounts receivable management (ARM) industry from European buyers into the United States?
Answer: Surprisingly, the answer is no, or at least not yet.
We thought that because of the favorable exchange rates between the Euro and the dollar, European companies would have shown a high level of interest in acquiring their way into the US market. Also, European debt buyers are seeing higher transaction multiples than their U.S. counterparts, another condition we thought would have spurred interest in U.S. companies. However, this has not been the case.
Most European buyers have focused on making acquisitions in their own countries right now and have chosen to take a wait-and-see approach to determine what impact the recessionary conditions will have on the performance of U.S. debt collection agencies and debt buyers. This is backed up by Kaulkin Ginsberg's recently-published quarterly ARM M&A report for the second quarter (" 2008 M&A Activity in the Debt Collection Industry on Target to Exceed 2007 Results," July 9). The largest deals in the industry last quarter involved European companies acquiring other European companies.
Ask us again next quarter and our answer might be dramatically different.
To send a question to Ask The Experts, please email editor@insidearm.com.
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Comment from Anonymous on July 17, 2008 at 10:37AM EST
The ARM industry in Europe is about to heat up. Surging commodity prices and a construction slow-down in countries such as Spain will give way to less consumer spending and an increase in household debt.
As the US Dollar continues its slide and sees greater pressure from the Euro, (now trading for upwards of $1.58 Dollars per Euro), commercial debt will increase due to revenues lost from decreased U.S. spending.
As a result of rising commercial debt, lost revenues, and increasing costs, European companies will be struggling to fend off worries that they are lacking capital. Europe's notoriously high multiples will then slide as investors sell their equity positions in European firms while companies release less than desirable results.
With a saturated American market, European ARM companies might reach out to the U.S. in hopes of a good buy, though what about Europe? Do I smell recessionary signs in Europe complemented by an ARM consolidation in Europe?