Q310 ARM M&A Activity Update ? Strategic and Financial Buyers Continue to Dominate the M&A Market

Rockville, MD – The ARM industry experienced a quieter M&A market in Q3 according to Kaulkin Ginsberg, the industry’s leading M&A and strategic advisory firm, however strategic and financial buyers remained very active. In Q3, there were 5 transactions totaling approximately $132 million in deal value – compared with 9 deals that generated $96 million during the same quarter last year. IQor’s recapitalization by Huntsman Gay was previously included in our Q2 results. For 2010 year-to-date the ARM industry has generated 23 transactions and $854 million in total deal value, compared to 29 deals and $202 million in deal value during the first three quarters of 2009.

According to Mark Russell, Director of Kaulkin Ginsberg, “Three out of the five transactions completed in Q3 involved a strategic or financial buyer, a significant difference from the third quarter of last year in which only three of the nine transactions involved a strategic or financial buyer.”  Notable announced transactions in Q3 include: 1) The recapitalization of Gila Corp by Owner Resource Group; 2) RLJ Equity’s strategic partnership with the owners of Enhanced Recovery Corp to form Enhanced Recovery Company; and 3) The joint venture between Indian-based Tata Capital and the Japanese firm Capital Services Holding Corporation to establish an Indian-based ARM company to serve the collection and back office needs of financial services and related clients.

“The next twelve months of ARM M&A activity will most likely reflect what we have seen transpire so far in 2010”, according to Russell. “With the economy stabilizing, unemployment rates leveling off and lending markets continuing to open up (albeit slowly), more strategic and financial buyers are seeking to put their money to work by acquiring strong performing and well managed companies. Those ARM companies that continue to perform well will gain their attention. I also envision further consolidation among ARM companies, particularly within certain markets like the credit card sector that are experiencing a contraction in client business volumes and a more stringent regulatory environment.”

Russell believes that the primary factors impacting M&A activity within the ARM industry will be company performance and regulatory/legislative changes. According to Russell, “For owners who are contemplating a sale of their business over the next twelve months it is imperative that they focus on maintaining their company’s current performance – both financially and competitively, and their regulatory compliance. Deterioration of performance and/or regulatory compliance issues will be major red flags to buyers.

Next year’s expected tax increases may motivate some owners to pursue a sale between now and the end of this year, but it will likely not have a significant impact on overall M&A activity within the ARM industry.”

About Kaulkin Ginsberg
As the leading strategic advisor for the accounts receivable management industry (ARM), Kaulkin Ginsberg has completed over 130 M&A transactions valued at over $3 billion. Services focus on analysis, growth, and exit strategies for ARM companies. Kaulkin Ginsberg’s media division is the worldwide leader in providing timely news and insight on the recovery of debt in all industries. Read more about Kaulkin Ginsberg at www.kaulkin.com.