M&A transactions in ARM industry (webnotes)

2006

• Collection bureau secures $60M, plans 1,100 hires in 18 months

• Michael Barrist to purchase NCO Group with One Equity Partners represents the largest deal in industry history – valued at over $1 billion.
  
• West Corporation, owner of West Asset Management, of a $4.1 billion recapitalization by private equity firms Thomas H. Lee Partners and Quadrangle Group.
• UK-based Cabot Financial's sale to Nikko Principal Investments for $478 million
• the sale of Baycorp Advantage's Australia-based collection division, Baycorp Advantage Collection Services, to Australia-based private equity firm Allco Equity Partners and Deutsche Bank Capital Partners, for $74 million.
• Collection agency has a strategic alliance with a BPO firm (NARS and ARM join hands)
• First Analysis, a large Research-focused investment firm have half a billion investments in niche companies and infact they recently acquired one of which is Collect America (NFS-alike).
  

Deals summary:

Collecto Moves To Expand By Acquiring ACA Healthcare Management Services

Titan Business Solutions Acquired By Johnson, Morgan & White

Intrum Justitia Acquires Two French Agencies

Bad Debt Buyer Calvary Investments Retains Salomon Smith Barney

NCML Limited Acquires CCS Hunter & Stewart

New Consolidator Patriot Financial Group Acquires Three Collection Agencies

The Revenue Maximization Group Acquired By NCO Group for $15.9 Million

Credit Smart Group Acquired By Repcol

Canada's Nova Collection Services Acquired By AllianceOne

Great Lakes Collection Bureau Acquired By NCO Group

Scottish Agency Stirling Park Acquired By Intrum Justitia For $13 Million

Carma Financial Services Sells Its Consumer Collection Agency Business

Baycorp Advantage Buys Out Remaining Share Of Alliance Group Holdings

Credit Corp Group Acquires Three Companies

Big Shakeout In Bad Debt Internet Auction Sites

Intrum Justitia Acquires Spanish Agency From Equifax

General Revenue Corp Added To Sallie Mae's Agency Acquisition Strategy

Challenger Financial Services Acquired By Thornton Capital Advisors

Pioneer Credit Recovery Acquired By Sallie Mae

Nordan Inkasso Acquired By Aktiv Kapital

Regency TMC Worldwide Acquired By Aktiv Kapital

Recovery Bureau of America Acquired By Canada's Allied Global Holdings

The total value of M&A transactions in the Accounts Receivable Management (ARM) industry will surpass any other year on record, if recent deal announcements close as expected this year. For the first half of 2006, there were 28 completed transactions, two significant pending transactions, plus other pending deals, representing an aggregate estimated deal value of $3.5 billion. By comparison, deal value for all of 2005 – a record year for deal activity – was just over $1.7 billion.

This surpasses last year's record-breaking $1.6 billion in deal activity, which includes all corporate events that involve a sale of equity: mergers and acquisitions, IPO and secondary offerings, joint ventures and strategic partnerships, and minority investments.

This record-breaking level of ARM deal activity is predominantly being fueled by the increased strength of the economy, growing levels of distressed consumer, commercial and government receivables, the receptivity of creditors to place or sell receivables, and the availability of funding for transactions within this industry.

"In 2005, companies and investors were well capitalized and motivated to buy or invest in well-run and growing companies, and the lending markets continued to provide abundant sources of cheap debt to help finance acquisitions. With these market trends, coupled with the ARM industry's ability to provide meaningful returns to investors, it is not surprising that a new record of total deal activity was achieved in 2005," said Mark Russell, Director at Kaulkin Ginsberg.

The debt purchasing sector was particularly active in 2005, generating more than 50% of the year's total deal value. Several leading debt purchasing and ARM companies were recapitalized or acquired in 2005, including Risk Management Alternatives, Collect America, Marlin Integrated Capital, Portfolio Management Group, and Resurgence Financial.

Besides consulting on M&A / Private Equity, advise and assist mid-sized US firms for leverage global resources and expertise. Typically the role is to conceptualize, plan, source a potential partner/vendor and help execute offshoring plans. iTech has also developed good team, IP and loyal clientele that clearly speaks of your acheivements.

I think it is a good fit for the overall business philosophy that we wish at this time.

New Tigers Of Asia

The Wall Street Journal (June 1, Page A6) reports that Economic Growth in India and China is keeping pace. India reported 9.3% growth in the three months ended March 31; this includes a 12.9% rise in Trade, Transport and Communication as well as 10.% in Finance and Real Estate.

Today, Morgan Stanley published its 90-page economic analysis, India and China: New Tigers of Asia, Part II. They expect China and India to be the dominant secular growth stories for the next 30 years. This is driven by favorable demographics, by structural reforms and by globalization.

India’s planners and politicians now speak of growth targets exceeding 10%. Analysts, businesspeople, and politicians agree that sustaining such growth rates will require unprecedented investments in infrastructure, similar to those of China. Free access to western media, has made India’s consumers long for the good life much faster than their Chinese counterparts, fueling accelerated consumption, consumer credit, and an upsurge in luxury goods spending.

The world’s most competitive and nimble economy, the United States, has much to gain from India’s aspirations. Whether you sell video games, movies, safety equipment, industrial goods, or computer chips, you should examine the market in India. When China liberalized, only large American companies could afford to deal with the complexities of Asia in the early days. It is different today. Successes with the WTO, better communications, and India’s more transparent capital markets make it possible for every American company regardless of size, to engage with India. Courtesy: AV

The Wall Street Journal (June 1, Page A6) reports that Economic Growth in India and China is keeping pace. India reported 9.3% growth in the three months ended March 31; this includes a 12.9% rise in Trade, Transport and Communication as well as 10.% in Finance and Real Estate.

Today, Morgan Stanley published its 90-page economic analysis, India and China: New Tigers of Asia, Part II. They expect China and India to be the dominant secular growth stories for the next 30 years. This is driven by favorable demographics, by structural reforms and by globalization.

India’s planners and politicians now speak of growth targets exceeding 10%. Analysts, businesspeople, and politicians agree that sustaining such growth rates will require unprecedented investments in infrastructure, similar to those of China. Free access to western media, has made India’s consumers long for the good life much faster than their Chinese counterparts, fueling accelerated consumption, consumer credit, and an upsurge in luxury goods spending.

The world’s most competitive and nimble economy, the United States, has much to gain from India’s aspirations. Whether you sell video games, movies, safety equipment, industrial goods, or computer chips, you should examine the market in India. When China liberalized, only large American companies could afford to deal with the complexities of Asia in the early days. It is different today. Successes with the WTO, better communications, and India’s more transparent capital markets make it possible for every American company regardless of size, to engage with India. Courtesy:AV

“Six Billion Minds” portrays the interplay between Globalization and Outsourcing

AUSTIN - May 31, 2006 - Global Equations, an offshore advisory firm, announces it's founder's contribution in a recently released book, 'Six Billion Minds: Managing Outsourcing in the Global Knowledge Economy'. The book is a collaborative and unique attempt to awaken global thinkers, leaders, decision makers and managers alike at the precipice of globalization. ”Six Billion Minds” succinctly provisions the collective wisdom of over 30 global visionaries, thought leaders, practitioners and experts in fields ranging from Technology to Venture Capital to Outsourcing. Transcendently lucid, this effort illustrates that the concomitant rise of the knowledge economy and global sourcing is not a coincidence and that individuals, corporations as well as entire economies need to embrace globalization or run the risk of being marginalized as the world’s economic order undergoes seismic shifts. Evoking lessons from core management areas such as, permutations of business and technology that enervate organizations, the book demonstrates ways to capitalize knowledge to address such issues. "Globalize or die", provocatively says Faisal Hoque, founder and chairman of BTM Institute and a co-author of Six Billion Minds. The book evaluates blunt realities and metamorphosis that underlie trends that will drive the way companies and governments conduct business. From essays on "the disaggregated corporation" to "the myth of cultural homogenization" the book covers a wide swathe of topics that should be on every executive's mind. Endowed with a rich complexity and kaleidoscopic portrayal of issues of various hue, the book is a tapestry of thought provoking ideas, prognostications and wisdom that is at once engaging and useful in its practicality. The book also contains the 2006 Global Outsourcing report that produces some interesting results when comparing different nations and evaluating their competitiveness and attractiveness as outsourcing destinations. Anupam Govil, founder of Global Equations, and a board member of TiE Global, unravels the dynamics of global sourcing. He brings in the vision of innovation, agility and outsourcing competitiveness in an ever-connected globe. He discusses the rise of nearshoring, optsourcing and other significant trends that will eventually lead to a ubiquitous global sourcing ecosystem.
Covering demand side indicators as well as supply side strategies, Anupam explains the evolving organizational dynamics that drive new outsourcing disciplines and vice versa. "ROI calculators are being re-tooled to accommodate the long-term capital and process value benefits of outsourcing and offshoring. From one perspective, organizations are shedding assets and devolving ownership and authority to outsourcing partners. Yet from another vantage point, these same organizations could be perceived as expanding outwards to include the ecosystem of the third party outsourcing vendors", suggests Anupam. Despite rising public sentiment, Anupam advocates a organizational proclivity from closed business models for securing intellectual property to "global innovation networks". He also raises a red flag for companies that blindly adopt outsourcing in order to embrace industry trends or imitate a competitor. "The right answer lies in an organization's own ability to identify it's key drivers, risk appetite, priorities and readiness". With the impending maturity of outsourcing, Anupam deems development of breadth and depth in services an imperative for outsourcing companies. Demonstrably aligned with the present KPO segment, he proposes the emergence of smaller niche service providers. "Business services will move from ‘fixed services' to 'services-on-demand', where the service offer will be tied in to the client's own profitability", adds Mr. Govil.

KPO firms offering KM such as investment and legal research services offer focussed, provide high end services and engage in higher QoS, expertise and management benefits. Equity research comes to my mind asap.

• why equity research is distinct from BPO: "About 80% of all BPO is call centre work, which is ancillary to the day-to-day lives of the professionals they are servicing."
  
• Core skills for Investment research?
  
• financial analytics - quantitative info, balance sheets, model creation, modulation, analysis, forescasting, cash flow, waterfall models are few of the base capabilities for investment banking. The resources conduct behind the scene work and provide hands-on support through the deal cycle.
• The modus operandi changes drastically
• Quality of workforce? savvier and smarter SPs know it all; senior and middle level management.
  
• SLA's? oh, much more structured, negotiable, flexible
• Attrition? backups, rotational groups, training and mentorship
  
• Fresh graduates? nah! unless with a captive route there is an incentive to hire, train, prune and grow a dedicated team model. can't assign high-end tasks immedtly..
• Body shopping? not anymore, i guess...nobody likes the term; vendors hate to even admit staffing service.
• engagement model? attaining efficient ---remember "KAIZEN"!
  
• Pricing? a mindful, though a key differentiator...
  
• Captive operations like those of HSBC, JP Morgan, Lehman Brothers and Citicorp have been recruiting MBAs to do equity research tasks.
• Investment banks globally target to halve $8 billion spent on research, says Deloitte Research.

Notes:

• Amba hires young accountants or MBAs in Sri Lanka and India, puts them through a five-week equity analysis course and then subcontracts its staff on a one-year basis to clients. Firms like Amba pay their analysts US$10,000 (HK$78,000) to US$25,000 per year and charge their clients upwards of US$50,000 per year. That compares with a total cost of US$150,000 to US$250,000 for a junior analyst on Wall Street or in the City of London, West said.
• PSi has a monthly analysis report on business, strategy and transactions. It has 100 clients and sells the reports at an annual subscription of $510. Evalueserve offers equity research in telecom, IT, pharma, biotech, financial services, energy, oil and gas and chemicals. The billing rates vary between $45,000 to $55,000 a year. While the work itself could take two days or two months.
  

• The head of research at a European bank that makes extensive use of firms like Amba said that outsourced analysts typically don't work on deal research, communicate with clients or corporates, or publish under their own name. Amba says it works for more than half of the world's top 15 investment banks and a string of hedge funds. But the banks are not eager to admit they outsource research, as they worry about perceptions of research quality. "They would rather admit to income tax evasion than to outsourcing," West quipped. The secrecy works both ways. Amba clients have code names, and "to talk about who your client is a firing offence," he said.

• Analysts estimate there are only about 1,000 to 1,500 people working in equities research in India and Sri Lanka; half of them for so-called "captive" units of global investment firms. The other half works for specialized outsourcing firms like Amba, Delhi- based Evalueserve and Chennai-based Irevna, a unit of Indian rating agency Crisil, itself owned by Standard & Poor's.