M&A Activity Explodes in First Quarter of 2012

Mark Russell

Buyers of accounts receivable management and related outsourced business services (OBS) companies seem to have bucked the trend of declining merger and acquisition (M&A) activity in Q1 2012, and instead acquired the largest number of companies in a quarter in over year: 21 transactions completed representing $700 million in deal value. In comparison, only 8 transactions worth less than $100 million in deal value were completed in Q1 of last year.

Typically, the first quarter of the year generates a low amount of M&A activity as owners and executives are focused on getting off to a good start in the New Year, and implementing their strategic growth plans.

In our Q1 report we discuss the M&A activity, market trends, and key growth areas of our three core OBS industries:

• Accounts Receivable Management (ARM)

• Customer Relationship Management (CRM)

• Revenue Cycle Management (RCM)

Here are some key highlights of the market trends and key growth areas covered in this report:

• RCM is the fastest growing OBS industry, with segments of it experiencing 10-30% annual growth; buyers, particularly private equity backed healthcare ARM and RCM companies, are eagerly seeking acquisitions as the healthcare ARM and RCM markets continue to converge – see Michael Lamm’s article on this topic for further details

• Despite the intense regulatory environment, which Rozanne Andersen has updated for us in her Regulatory Briefing, the ARM industry continues to attract both strategic and financial buyers particularly those that specialize in the healthcare, government and educational services markets

• The CRM market continues to experience single digit annual growth, but there are certain segments that are experiencing double digit growth and expected to continue this trend for the next several years

• Private equity buyers continue to pursue opportunities and acquire OBS companies, but they are starting to be outbid by strategic buyers – see Mike Ginsberg’s article on private equity and why there have been challenges for certain owners in consummating recent deals 

• As always, we end our report with our perspective on what the future holds within our core industries

We appreciate your interest in reviewing our report and would be more than happy to confidentially address any questions you have regarding its content, or your current business interests – please contact Mark Russell at 240.499.3804 or send an email to Mark at mark@kaulkin.com to schedule a call.