International Deals Dominate Q1 2007 M&A Activity in the ARM Industry

The Accounts Receivable Management (ARM) industry continues to globalize, as evidenced by the recent worldwide level of merger and acquisition activity.

According to Kaulkin Ginsberg, a strategic advisory firm focused on the ARM industry, 60% of transactions completed in 2006 were cross-border deals – defined as a transaction where the buyer and seller were based in different countries. The momentum continued in Q1 2007, where there were nine M&A transactions completed, and five of them were cross-border deals. The remaining transactions were spread across the world, with one transaction each in India and the UK, and two in the U.S.

“Globalization within the ARM industry is a trend we’ve been watching for some time,” noted Michael Lamm, Associate at Kaulkin Ginsberg. “ARM companies in maturing markets are looking to expand into geographic areas with growth potential.” Often, this expansion is achieved through acquisition of a locally-established firm.

So far this year, cross-border deals involved target companies located in the U.S., Australia, the UK, and Malaysia. The largest transaction of the quarter, in terms of deal value, occurred in January, when a consortium of private equity firms (Oak Hill Capital Partners, GenNx360 Capital Partners, and Knox Lawrence International) acquired Vertex Outsourcing, which has an ARM utility focused division (First Revenue Assurance), from UK-based United Utilities PLC for roughly $428 million as a platform acquisition. Also in January, U.S.-based NCO Group’s subsidiary Australian Receivables Limited, increased its Australian market presence with the add-on acquisition of Statewide Mercantile Services.

In addition to cross-border expansion, strategic acquisitions took place domestically in Australia, the UK, the U.S., and India. In India, business conglomerate Essar Global acquired Global Vantedge, an India based ARM and business process outsourcing provider, from ChrysCapital, a private equity fund based in India. In early March, U.S.-based Kadent Corporation, formerly ARM Holdings, Inc., an ARM firm specializing in healthcare collections, sought growth in its niche by merging Mutual Hospital Services, Inc., a collection agency based in Indiana, into its operations. 

In terms of the level and value of M&A activity, Q1 2007 is slightly lower than last year. In Q1 2006, there were 13 transactions with a total deal value of $223 million. The nine transactions completed in Q1 2007 totaled $119 million. “M&A activity fluctuates, even in banner years,” noted Lamm, “Based on several pending large ARM transactions we know of, we expect this to be another strong year.”

Kaulkin Ginsberg is the parent company of Kaulkin Media and insideARM.com.