Strategic and Financial Buyers Return to the ARM M&A Market

Rockville, MD – The Accounts Receivable Management industry enjoyed an active M&A market in the second quarter of 2010, according to Kaulkin Ginsberg, the industry’s leading M&A and strategic advisory firm. In Q2, there were 11 transactions with a total deal value estimated at $550 million – compared with only nine deals that generated $143 million during the same quarter last year.

Four large transactions generated 95% of the Q210 deal value, three of which were completed by strategic and financial buyers. Announced transactions include: 1) Philadelphia-based Radian’s (NYSE: RDN) divestiture of its entire stake in Sherman Financial for $172 million in cash; 2) Aditya Birla Minacs’ acquisition of Bureau of Collection Recovery (terms were not announced); and 3) Duke Street Capital’s recapitalization of Marlin Capital in the UK. However, the vast majority of transactions are still being completed by industry buyers, as evidenced by Q2 results in which 8 out of 11 deals were either management buy outs or larger ARM companies acquiring smaller ones.

“M&A activity certainly picked up this quarter and we see this trend continuing for the remainder of the year,” said Michael Lamm, Associate at Kaulkin Ginsberg. “There is a greater level of seller and buyer interest, but buyers are still concerned about the sustainability of future liquidation performance and how a double dip recession may impact the ARM industry."

With this continued economic uncertainty, Lamm expects that buyers will continue to use deal structure (earn-outs, retained equity, seller’s notes) to mitigate their down-side risk and bridge valuation gaps with sellers.

Looking ahead to the rest of 2010, Lamm believes that the two primary factors impacting M&A activity within the ARM industry will be changes in client business volumes and unemployment rates. According to Lamm, “We need sustainable job growth/creation to stabilize our economy and make credit issuers more willing to originate debt.” Lamm also expects capital gains to increase in 2011, which will drive some ARM companies to consider an exit before year-end rather than be faced with a bigger tax bill in 2011.

As the leading strategic advisor for the accounts receivable management industry (ARM), Kaulkin Ginsberg has completed over 130 M&A transactions valued at over $3 billion. Services focus on analysis, growth, and exit strategies for ARM companies. 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.