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, a strategic advisory firm, is conducting an ongoing operational benchmarking study for the accounts receivable management (ARM) industry. The research addresses three quantifiable areas of participating collection agencies’ operations including staffing, company financials, and collection statistics. The survey has already produced some interesting results.
For the twelve month period ending on June 30, 2006, the average collector brought in nearly $655,162 in gross revenues. This figure was calculated by dividing the gross collections for each company participating in the study (gross collections are total recoveries, including payments to creditors) by the number of collectors on staff and taking the overall average. The median gross revenue taken in by collectors during this same period was $400,774.
Twenty-two companies participated in this phase of the study, including Asset Management Outsourcing, H&R Accounts, IC System, MRS Associates, and West Asset Management. ARM Revenues of participants averaged $26,616,186, and ranged from $800,000 to well over $50 million.
“The purpose of this research initiative is to give ARM companies the opportunity to benchmark themselves against their competitors while retaining anonymity,” said Kaulkin Ginsberg Director Paul Legrady. “Interest in our first study was high, so we’ve decided to continue the study, covering all of calendar year 2007.” Participating companies can analyze their own standing within the ARM marketplace and monitor industry trends.
All participants sign confidentiality agreements. The results of this study are returned to participants in aggregated form, and none of the reported information is attributable to specific companies.
More information about Kaulkin Ginsberg’s Operational Benchmarking Service is available at http://www.insidearm.com/go/benchmarking or contact Devin Sherman of Kaulkin Ginsberg at 301-907-0840 ext. 124.
About Kaulkin Ginsberg
Kaulkin Ginsberg is the leading strategic advisor to accounts receivable management and related business services companies, helping owners and executives succeed in their efforts to analyze, grow, or exit their businesses. Services include merger, acquisition, and valuation advice; market research; debt purchase and sales advice; operational consulting; and executive search. Kaulkin Ginsberg’s media division publishes the most popular sources of timely industry information such as insideARM.com(TM) and The ARM Insider(TM). Kaulkin Information Systems provides secure, affordable document management and workflow systems. Read more about Kaulkin Ginsberg at www.kaulkin.com.
insideARM.com(TM) (formerly CollectionIndustry.com) is published by Kaulkin Media, a division of Kaulkin Ginsberg. insideARM.com is the leading source of news and information for collection and accounts receivable management (ARM) professionals worldwide. The site distributes five e-newsletters and offers subscription based access to proprietary market research. insideARM.com provides invaluable resources to ARM professionals and is widely considered the premier networking portal for the industry. Read more at www.insideARM.com