First Quarter M&A Activity in the ARM Industry Dominated by Healthcare Sector Deals

In the first quarter of 2011, the number of merger and acquisition transactions in the accounts receivable management (ARM) industry kept pace with deal activity during the same period a year earlier, but the total value of those transactions declined according to Kaulkin Ginsberg Company, the leading M&A and strategic advisory firm in the outsourced business services sector.

Seven deals were completed in Q1 2011, representing $77 million in total deal value.  By comparison, the same number of transactions closed in the first quarter of 2010, but deal value was $60 million higher a year ago.  In Q1 2009, Kaulkin Ginsberg Company reported 11 transactions that totaled $92 million in deal value.

Healthcare appeared to be the sector of choice for ARM M&A activity at the beginning of this year.  Five of the seven acquisitions that were completed in the first three months of 2011 were of firms that provide receivables management services to healthcare industry clients.

Kaulkin Ginsberg Company’s analysis of Q1 transactions finds that an increasing number of financial buyers are pursuing platform acquisitions due in part to improvements in the lender market.  That interest has been driven by recent positive financial performance among some ARM companies.  Whether or not those gains are sustainable remains to be seen, and will impact both transaction volume and deal structure in the next nine months of the year.

According to Mark Russell, KGC Director, “For the time being we are still seeing the use of deal structure in the majority of completed transactions, but buyers are starting to look at increasing the cash components of their bids as a way to make their offers more competitive.”

Kaulkin Ginsberg Company believes that more industry and strategic buyers are exploring transaction opportunities.  Some buyers are seeking platform acquisitions that will facilitate diversification into new markets with fresh growth potential.  Other buyers are being drawn to add-on acquisitions that fit well within their companies’ existing operations and client bases in order to gain market share and boost up-sell/cross-sell opportunities.

“The year is just getting started,” said Michael Lamm, KGC Director.  “We anticipate that 2011 will see at least the same number of transactions as 2010—if not more—and Kaulkin Ginsberg expects an increase in the number of large deals later in the year.”

Kaulkin Ginsberg is the leading source of M&A, strategic advice, and timely information for outsourced business services companies since 1989. The firm has completed over 130 transactions representing in excess of $3 billion in shareholder value for a variety of clients – from small family businesses to Fortune 500 companies. In 2011 Kaulkin Ginsberg is celebrating twenty years in the ARM industry.