Second Quarter M&A Deal Value in the ARM Industry Highest in Three Years

In the second quarter of 2011, the number of mergers and acquisitions in the accounts receivable management (ARM) industry kept pace with deal activity during the same period a year earlier, but total transaction value well exceeded totals from the second quarter of 2010, according to Kaulkin Ginsberg Company, the leading M&A and strategic advisory firm in the outsourced business services sector.

Ten deals were completed in Q2 2011 representing $646 million in total deal value, more than eight times the deal value generated in Q1 2011. In a year over year comparison, Q2 2011 produced one less deal than Q2 2010 (11 deals), but the total value in Q2 2010 was only $599 million.  Q2 2011’s $646 million represents the largest single-quarter total since Q2 2008.

For the first half of 2011, the ARM industry generated $723 million in total deal value.  In the first half of 2010, total deal value was $737 million.

The global ARM market was active in Q2, with five international transactions completed generating just under $600 million of the total $646 million in deal value.

Kaulkin Ginsberg’s analysis finds M&A activity has picked up in most sectors, including the ARM industry, as lenders have begun to increase their lending multiples both at the senior and mezzanine debt levels.

“For companies generating less than $10 million in EBITDA we have seen lenders provide 2.5 – 3.5X EBITDA in senior debt and 3 – 4X EBITDA in total debt to finance deals,” said Mark Russell, Kaulkin Ginsberg Director. “For companies generating $15 million or more in EBITDA, we have seen these levels jump to 3 – 4X EBITDA in senior debt and 4 –-5X EBITDA in total debt.”

Significant international transactions include Cabot Financial, a UK debt buyer, which was recapitalized by Anacap for about $147 million (Cabot was previously acquired by Nikko Financial for roughly $478 million); Lowell Group was acquired by TDR Capital from Exponent Private Equity; EOS Group acquired a platform in France and Brazil; and the Kruk Group, a Polish debt buyer, successfully completed an IPO.

Noteworthy U.S. transactions include Waud Capital’s recapitalization of Revenue Cycle Solutions (RCS), and NARS’ acquisition of Integrity Financial Partners, the second add-on transaction for H.I.G. Capital’s platform company.

In addition, NCO Group, the largest U.S. ARM company, completed two transactions in the customer relationships management (CRM) space: Protocol, formerly an H.I.G. Capital portfolio company, and APAC Customer Services.  These transactions are not reflected in Kaulkin Ginsberg Company’s quarterly deal figures cited above.

Kaulkin Ginsberg is the leading source of M&A, strategic advice, and timely information for outsourced business services companies since 1989. The firm has completed over 130 transactions representing in excess of $3 billion in shareholder value for a variety of clients – from small family businesses to Fortune 500 companies. In 2011 Kaulkin Ginsberg is celebrating twenty years in the ARM industry.