Are Recent UK ARM Acquisitions Isolated Events or Trend Setters?

Mike Ginsberg

Not even three months into the New Year and already two major transactions involving sizeable European debt collectors have been announced. Are these isolated events or are any trends developing for US ARM service providers in Europe?

Let’s take a look.

In January, EOS Group, a large international receivables management firm headquartered in Hamburg, acquired the debt collection operation of Spanish financial institution Banco Popular for €135 million, expanding upon the acquisition that it made in 2009 of Acción de Cobro, the debt collection unit of Banco Pastor. EOS operates 49 companies in 27 countries and provides marketing information, risk information and payment services in addition to receivables management.

On March 1, Capita, a leading provider of business process management in Europe, South Africa and India, acquired iQor Holdings UK Ltd and subsidiaries (iQor UK) from its US parent company for €42 million. The transaction adds later stage debt recovery expertise to Capita’s existing early and final stage businesses. iQor announced that it will focus on its North American operations as well as its near-shore and offshore locations.

Will other US collection agencies divest their UK based collection operations?

Not likely. It is not common for a US ARM company to have a beachhead in Europe. Those that do are experiencing expansion opportunities and appear to be more focused on growth than divestiture. However, I suppose if the price is right then anything is possible.

Will US agencies that don’t currently have a presence in Europe acquire their way into this region?

I don’t see this trend developing in the near future unless pricing comes way down. The notion of a US ARM company buying its way into Europe has been discussed for years, yet it only happened a few times and that was by the private equity backed consolidators of the late 1990s. It is a lot more likely that European based service providers with similar characteristics to EOS and Capita will expand their presence through an acquisition of another service provider based in their region before another US operation jumps the pond through a purchase.

What about organic expansion outside the US?

In one word, absolutely. Some US collection agencies and debt buyers have already expanded their operations into Central and South America as well as into European countries. We believe this trend will continue as client opportunities present themselves outside the US, predominantly in the telecom and banking sectors, and as regulatory scrutiny continues to increase in the US. Also, US agencies who have invested considerable capital into expanding their technology infrastructure will welcome expansion opportunities provided they can find local leadership to support their move.