Parthenon Capital Recapitalizes Diversified Collection Services, Inc.

San Francisco, CA – Parthenon Capital, a leading middle-market private equity firm, announced today that it has led a $167 million recapitalization of Diversified Collection Services, Inc. (DCS) of Livermore, California. DCS is a leading private collection agency for government obligations, such as delinquent student loans and taxes. The proceeds of the investment were used to redeem the interests of certain shareholders and provide growth capital to the company.

Jim Tracey, founder and CEO of DCS remarked, ?Parthenon Capital differentiated itself to us by showing a deep understanding of our business and by placing tremendous value on our employees and their capabilities. Parthenon also has executed on everything it said it was going to do. I am excited about our partnership going forward and the continued great prospects for our company.? Mr. Tracey will continue in his roles of Chairman and CEO upon closing of the transaction and continue in an active leadership role at the company.

Will Kessinger, who leads Parthenon Capital?s West Coast office stated, ?DCS competes and wins in the highly competitive collections industry through its laser focus on the government market, the unique strategy of making collectors fully accountable for specific accounts, and proprietary systems. These systems, which are based on years of government collection experience, enable this heightened collector accountability and key processes such as skip tracing. The company?s commitment to excellence permeates all levels of the organization and has been demonstrated in the marketplace by the company?s top ratings in competitive collection situations.? Kessinger added, ?We believe that the collections of government receivables will be an exciting growth market that will benefit from increased outsourcing. Therefore, DCS?s challenge is not achieving growth, but managing growth, which is where Parthenon Capital and management will work together to execute against the most compelling opportunities without disrupting the values and culture of a great company.?

Lisa Im, President of DCS, described her enthusiasm for the transaction: ?DCS is already the leading collection agency in the government market; this partnership with Parthenon Capital will allow us to pursue a much broader agenda in related areas of the student loan industry and tax collection market through strategic relationships and acquisitions.? Jon Shaver, Vice Chairman and Executive Vice President, continued: ?These types of opportunities offer tremendous revenue synergies and strategic benefits to the company.?

With the opening of Parthenon Capital?s San Francisco presence in 2001, the office has been aggressively pursuing investments west of the Mississippi, as well as focusing on business services, the food industry, and healthcare services. Parthenon Capital maintains a strong relationship with its sister company, The Parthenon Group (?TPG?), a leading management consulting firm. ?We leverage the deep strategic and operating knowledge of our team and TPG to help companies achieve their Full Potential™,? said Marc Rubin, a Vice President at Parthenon Capital. ?Helping entrepreneurial growth companies like DCS institutionalize business processes and build their execution capability is what we do every day.?

Converge Capital, Inc. acted as exclusive financial advisor to Parthenon Capital and also made an equity investment in DCS. Viant Capital LLC (f/k/a Neveric Capital) acted as exclusive advisor to DCS. Madison Capital Funding LLC led the senior debt financing and Allied Capital provided subordinated debt financing.

Diversified Collection Services has specialized in providing repayment services for various types of both State and Federal debt for over two decades. DCS earned its reputation as the nation’s leader in this unique and specialized industry, and has grown to become the largest provider of repayment services for federally funded student loans, delinquent individual and business taxes owed to state governments, and non-tax debt owed to states and the federal government. By combining our proprietary automated state of the art computer system with proven effective technology, DCS delivers results and performance that exceed our clients’ expectations and yield organizational strength, resilience and growth. DCS is currently handling an active inventory in excess of $2 billion. For more information, visit www.dcswins.com.

Parthenon Capital (PCAP™) is a $1.1 billion private equity firm focused on providing capital and strategic resources to middle-market companies. With offices in Boston and San Francisco, Parthenon works with owners and managers building value by providing growth capital plus strategic and operating expertise, enabling a company to reach its Full Potential™. Investment preferences include providing equity and sub-debt capital to middle-market and later-stage growth companies with revenues between $50 million – $500 million. Parthenon Capital has a particular expertise in the following industries: Business/Financial Services, Healthcare, Consumer Products, Value-Added Distribution, and Food & Beverage. For more information, visit www.parthenoncapital.com.