Mike Ginsberg?s Blog: Improving Conditions for M&A

Last week, we announced the sale of Minnesota-based collection agency Bureau of Collections Recovery (BCR) to Aditya Birla Minacs, an Indian business solutions provider (read the whole story).  What is the climate for mergers and acquisitions in the ARM industry in general, and are there any trends indicated by this particular transaction?

The prevailing mood among M&A professionals across most markets in the U.S. has turned quite positive recently, and most M&A advisors are predicting a jump in middle market deal-making in the coming quarters – despite concerns regarding the instability of the stock market. This positive outlook is attributed to several factors:

1. Improved economic outlook
2. Increased corporate profits
3. Large cash reserves held by companies and private equity firms – according to J.P. Morgan, corporate America has almost a trillion dollars hoarded on its balance sheet and private equity firms are reported to have over $600 billion of uninvested capital and approaching near term investment period expirations.
4. Signs that the credit markets are beginning to open up
5. The Fed recently pledged to keep the federal-funds rate low for an extended period of time.

Within the ARM industry, conditions for mergers and acquisitions are improving.  Interest among both buyers and potential sellers has increased in recent months.  This is partly attributed to improvements in liquidation performance among service providers; however there are still concerns about protracted high unemployment in the U.S., fluctuations in loan origination volumes, and the financial turmoil in Europe.

The BCR sale to Minacs demonstrates that international buyers – particularly off-shore companies – remain interested in the U.S. ARM industry.  The acquisition of a U.S. collection agency by a foreign company is not a new phenomenon.  Over the past decade, transactions involving U.S. collection agencies as sellers to non-U.S. buyers have occurred across nearly all sectors of the industry, including healthcare, utilities, retail, education, and commercial.

It is worth noting that companies that are focused on debt buying are not included in the mix of U.S. companies sold to a non-U.S. buyer.  Those transactions have occurred among private equity firms and large U.S. companies already in the ARM industry.  That topic is for another blog on another day.

Mike Ginsberg is the leading M&A expert for the accounts receivable management industry. He leads a premier advisory team that helps ARM industry owners and executives succeed in their growth, exit, and M&A strategies. Check out his page on insideARM.com.