Now that NCO Acquired OSI, Who?s Next?

For anyone who has followed NCO over the past 15 years, it comes as no surprise that they were able to close and fund the OSI acquisition.  I can’t recall a transaction that Mike Barrist and his team announced that they were not able to close and fund.  Since then, I’ve been asked the same two questions repeatedly: “Are deals still getting done in the ARM industry?” and “Who’s next”?

M&A transactions continue to get done in the ARM industry in spite of the tough lending environment.  While cheap debt is harder to come by, it is the billion dollar plus leverage buy-out transactions that are consistently falling apart, not the deals in the lower to middle-market range (Less than $250 million in value).  Let me remind everyone that the vast majority of ARM transactions fall into this lower to middle range of the market.  

Yes, some transactions are being priced lower or structured differently so the risk is shared between the buyer and the seller.  Reductions in purchase price or changes in deal terms are occurring for two primary reasons.  Either the seller experienced a major performance change, such as a loss of a major client that forced the buyer to reconsider their initial proposal, or the buyer is not able to secure financing from its lenders.  If the buyer is a public company, their stock price may have slipped to a point where the price is no longer accretive.