Private Equity Legend Enters the ARM Industry - Big Time

Private equity has been fueling a lot of the recent larger deals in the ARM industry.  From NCO’s bid to go private to the purchase of UK debt purchaser/collector Cabot Financial, private equity has been hot on the ARM industry for a while now.  So it should come as no surprise that one of private equity’s legends seemingly has his eye trained on debt purchasing and collection.

In April, two separate deals were announced involving major players in the ARM industry and a firm called J.C. Flowers, LLC.  First, on April 16, J.C. Flowers was named as the lead firm in the massive buyout of Sallie Mae, a deal worth about $25 billion.  The deal, while spectacular in its size and players (Bank of America and JP Morgan Chase were also involved), did not really set off any alarms in the industry.  Sure, Sallie Mae has grown into one of the largest collection agencies and debt buyers in the country, but they are primarily a student loan firm, and it was that business that sparked the deal.  In the deal, J.C. Flowers will own 50.2 percent of Sallie Mae.

A week later, it was announced that J.C. Flowers had snatched up 25 percent of the outstanding shares of debt purchaser Encore Capital Group (Nasdaq: ECPG).  More importantly, representatives of J.C. Flowers were being invited to join the Encore board of directors and help guide the company into the future.  After the dust settled on the busy week, J.C. Flowers owned 50.2 percent of a company that recorded revenues from collections of $240 million last year and 25 percent of a debt purchaser that had revenues of $255 million in the same time period.  So basically: a new major ARM player was created.

So who, or what, is J.C. Flowers, LLC?  Short answer: they’re a private equity firm based in New York.  They specialize in investing in financial companies.  They have an office in London.  But there is, of course, a lot more to the story.

J.C. Flowers is so named for its leader, J. Christopher Flowers.  A former partner at investment banking powerhouse Goldman Sachs, Flowers hung his own shingle in 1999 with J.C. Flowers, LLC.  He is ranked 322 on Forbes’ most recent list of the 400 richest Americans.  And he’s somewhat of a legend in investment banking and private equity circles.