A Lot More Portfolios and a Lot More Buyers ? Debt Purchasing Leaders Say

BETHESDA, Md. ? While there are a lot more debt portfolios for sale today than in past years, there also are a lot more buyers pursuing them, and as a result prices are artificially high ? These were among the issues raised by debt purchasing leaders in a recent panel discussion hosted by CollectionIndustry.com.

As part of its new Industry Leaders section, CollectionIndustry.com assembled a panel of some of the foremost debt purchasing experts to discuss the past, present and future of the industry. Included in the discussion were Jack Lavin of Arrow Financial, Mike Meringolo of NCO Portfolio Management, Stacey Schacter of EMCC, Inc., and Al Brothers from Cavalry Investments. Moderating the discussion was Mike Ginsberg, CEO of Kaulkin Ginsberg, a provider of M&A and strategic advisory services to the Accounts Receivable/ Customer Relationship Management industry and publisher of CollectionIndustry.com.

?There are so many new entrants today that prices have become artificially high,? said Jack Lavin, president and CEO of Arrow Financial Services LLC., who says it could take another year or more for prices to come down. ?There is a tremendous amount of money chasing these portfolios today. Some people have very sophisticated underwriting and valuation programs and others do not. Our position is to wait until prices get to where they make sense for us to buy.?

The panelists also discussed the changing face of both dept purchasers and the portfolios they are acquiring, with smaller purchasers entering the scene and the diversification of available portfolios. Despite the failure of organizations like Credit Trust and CFS, the panelists also say the debt purchasing industry is gaining newfound respect among financial investors, citing the successful IPO of Portfolio Recovery Associates Inc. (PRAA) and the entry of collections giant NCO to debt purchasing as high profile examples.

?This shows how our industry is maturing,? said Stacey J. Schachter, CEO and general counsel of EMCC, Inc. ?There are companies besides PRAA and NCO that are being accepted by the capital markets now and our industry is being accepted as a viable, respectable industry.?

The panelists also had some suggestions for collections agencies thinking about getting into debt purchasing.

?Ideally, a first time buyer should begin with a moderate-sized buy, either self-funded or with a financing partner they know; buy paper they know and be conservative with regard to expected return on investment,? said Mike Meringolo, senior vice president of acquisitions and portfolio management for NCO Portfolio Management. ?The agency owner should recognize that servicing purchase receivables is different from contingency collections.?

The panelists had some predictions for the future of the industry as well.

?The biggest immediate threat to the industry would be an influx of new money combined with lack of pricing discipline that would drive prices up to unrealistic or unsustainable levels,? said Alfred J. Brothers, Jr., senior executive vice president of Cavalry Investments, LLC. ??Without being careful about what you buy and how much you pay for it, buyers have real risk of being disappointed.?

The full text of the panel discussion is available in the new Industry Leaders section of CollectionIndustry.com.

Available free of charge, CollectionIndustry.com is the most widely circulated publication in the Accounts Receivable Management space, with news, job listings and other resources for credit and collection professionals.

About Kaulkin Ginsberg Company
Kaulkin Ginsberg provides strategic advisory services, outsourced sales, and information services to the business services sector. The company is the most recognized source of advice, expertise and information for the Accounts Receivable/Customer Relationship Management industries, with more than 100 completed M&A transactions valued in excess of $2 billion. The Kaulkin Partners division is the ARM industry?s most effective outsourced sales alternative. The Kaulkin Media division includes CollectionIndustry.com and Credit & Collection Daily, and is the leading source of comprehensive and timely information for credit and collection professionals.