Accounts Receivable Mergers and Acquisitions Start Strong in 2016
April, 27th 2016
Mergers and acquisitions are going strong in the accounts receivable management industry after solid activity in the first quarter this year, according to ACA affiliate member company Corporate Advisory Solutions.
There were nine completed transactions in the first quarter totaling $449 million in enterprise value.
“The ARM sector had a strong first quarter driven by multiple trends that Corporate Advisory Solutions has been seeing. Both trends center around renewed interest in the ARM sector,” said Managing Partner Michael D. Lamm.
Off-shore companies are starting to acquire U.S. ARM companies, he said. “Off-shore firms are able to realize significant synergies through consolidation of back-office operations with their off-shore capabilities while leaving the front-end (for example voice capabilities by the U.S. ARM firm intact),” Lamm said.
Private equity firms are also attracted into the ARM sector. “They believe platform investments that have best in-class compliance management systems are able to take advantage of the consolidation trend we are seeing in the market. Platform acquisitions provide a unique opportunity to position the company into new market verticals through small roll-up acquisitions, without the troubles associated with organic growth. Despite the macroeconomic and political turmoil, collections have remained steady and have continued to garner increased interest.”
As ACA previously reported, Corporate Advisory Solutions recently served as an advisor to Altus in its acquisition by NewSpring Capital, Evergreen Industries and Spring Capital Partners.
“The Altus transaction signaled a return of private equity into the commercial ARM market. The transaction marked the first time since the financial crisis that private equity has invested into a commercial ARM firm,” according to the Corporate Advisory Solutions newsletter.
While the company continues to see consolidation within the ARM industry, findings from the first quarter also reflect trends in corporate divestures.
Corporate divesture in the first quarter was “primarily driven by a shift in focus from parent companies due to changing economic and business conditions, motivating them to divest in non-core products and services.”
Consolidation in the ARM industry is expected to continue this year as large creditors continue to combine their vendor networks with larger companies that can support their collection and compliance needs, according to the newsletter.
“As regulations increase and become even more stringent, large creditors are being forced to consolidate their vendor network to larger, more scalable ARM vendors,” Lamm said.
However, smaller ARM companies will continue to see challenges in keeping their operations independent as regulatory and compliance requirements are on the rise.
“Many smaller vendors are failing to meet compliance requirements as they do not have the financial means to invest heavily in compliance and technology platforms compared to the larger ARM vendors,” Lamm said. “The larger vendors who meet regulatory and compliance requirements are well-equipped to absorb the smaller vendors facing distressed situations.”
Corporate Advisory Solutions also released a new ARM regulatory update with news on regulatory activity by the Consumer Financial Protection Bureau, U.S. Department of Education, Federal Trade Commission and Office of the Comptroller of the Currency. As part of the report, Corporate Advisory Soluctions confirmed that representatives from the company will attend ACA International’s 2016 Convention & Expo June 16-18 in Denver, an opportunity for credit and collection professionals to be a part of interactive educational sessions, peer-to-peer learning, additional regulatory updates and more.