Q109 M&A Activity in the Accounts Receivable Management Industry Led by Industry Buyers and Veterans

Rockville, MD – Economic and market conditions have impacted the size and structure of completed M&A transactions in the debt collection / accounts receivable management industry, according to Kaulkin Ginsberg, the industry’s leading M&A and strategic advisory firm. Although the volume of Q109 transactions was consistent with first quarter results of prior years, the total deal value was significantly lower, reflecting a shift away from strategic and financial buyers acquiring platform companies toward larger industry players acquiring smaller add-ons.

Ten transactions were announced in 1Q09, compared to nine transactions in the same timeframe in both 2007 and 2008. However, Kaulkin Ginsberg estimates the total deal value of 1Q09 transactions at $27 million, compared to roughly $461 million in deal value in Q108 and $119 million in Q107. In all ten transactions, the buyers were either existing ARM companies or former executives of ARM companies.

“In spite of challenging market conditions, larger ARM companies and former owners/executives with cash are pursuing attractive acquisition opportunities with minimal competition,” said Mark Russell, Director at Kaulkin Ginsberg. “We predicted this trend early last year when the credit crunch unfolded and lenders began to back away from financing larger deals, which ultimately limited the purchasing ability of some strategic and financial buyers. We’re also seeing a consolidation trend happening under the radar in which smaller agencies and debt collection law firms generating less than $1 million in annual net fees are being absorbed by larger companies in the industry.”

Publicly-announced examples of this trend include Georgia-based Credit Systems’ acquisition of Rapid Collection Systems of Arizona. Both agencies specialize in apartment and rental collections. In February, the assets and facilities of Elite Recovery Services, a New York debt collection firm that had ceased operations, were acquired by industry veteran Anthony Frisicaro. Mr. Frisicaro was founder of Account Solutions Group, LLC, a debt collection agency that was sold to India-based ICICI OneSource (now Firstsource Advantage, LLC) in 2004.

Other transactions included three deals within the healthcare sector – a niche that has been less severely impacted by the recession. In January, Illinois-based Revenue Cycle Solutions, Inc. acquired and merged with healthcare collection agency CashRetriever Systems, Inc. In February, Capio Partners, LLC announced the acquisition of the Healthcare debt-purchasing division of Atlantic Credit & Finance; and California firm Inland Capital Services moved into the healthcare sector with the acquisition of the major assets of Maddocks Collection Service of California – a transaction financed by a boutique investment firm.

“We expect that industry buyers will dominate M&A activity for the remainder of the year,” noted Russell, “although some well-capitalized strategic buyers are actively seeking the right ARM companies for their particular needs. We are also starting to see interest from financial buyers partnering with the U.S. Government to acquire toxic assets from the banks. These firms are interested in ARM companies that can help them to service the bank assets.”

About Kaulkin Ginsberg
As the leading strategic advisor for the accounts receivable management industry (ARM), Kaulkin Ginsberg has completed over 125 M&A transactions valued at over $3 billion. For ARM service providers, services focus on analysis, growth, and exit strategies. For credit grantors, the focus is on optimizing receivables management strategies. Kaulkin Ginsberg’s media division is the worldwide leader in providing timely news and insight on the recovery of debt in all industries. Read more about Kaulkin Ginsberg at www.kaulkin.com.

EDITOR’S NOTE: Kaulkin Ginsberg is a sister company of insideARM.com.