Thinking Strategically in the Current ARM M&A Landscape: Dissecting the Central Credit Services - Astra Transaction -

The accounts receivable management (ARM) industry is still operating under severe financial constraints, like the rest of the economy, especially when it comes to securing resources for expansion. But mergers and acquisitions are happening for those with the strategic vision to creatively integrate operations.

Many deals in the ARM industry are tactical; they are driven by the need to expand client rosters. Indeed, acquiring a company that you do not directly compete with can be the best way to grow a client list. And even in a down economy, small tactical deals are happening. But larger deals require a more strategic vision before investors and capital jump onboard.

A recent example is Jim Eccleston, Chairman & CEO of Central Credit Holdings (CCH), with its wholly owned subsidiary Central Credit Services a auto deficiency, bankcard/credit card focused agency headquartered in Jacksonville, Fla. His firm recently acquired Astra Business Services, a collection agency based in California, but with more than 210 collectors in two locations in India. Kaulkin Ginsberg represented Astra in the deal.

Although my view was from the other side of the transaction, the long-term strategic plan involved on the acquiring side of the transaction was what drove it to close. Jim wanted to give his clients a viable offshore option that he owned and managed. Jim, and the venture capital that backs his firm, liked that Astra had started as an ARM shop in India, rather than migrating CRM agents to collection work. What really leapt out at me was that he was relatively uninterested in Astra’s current clients; he cared more about the highly tenured staff that was in place and the facilities that house them. Also, there was plenty of capacity at Astra’s two locations for expansion. So the deal brought him immediate capacity that would have taken years to develop.

The strategic fit was clear: acquire an offshore platform that would allow Central Credit Services to offer clients and potential clients a low-cost, full service ARM solution, one that could be easily expanded in current facilities.

Deal activity in the ARM industry has been less active than in prior years due to the economic conditions, but deals are still getting done that are driven by clear visions of how the acquired entity will fit into the overall company.

Michael Lamm (http://www.linkedin.com/pub/0/61/a2b) advises owners on their growth and exit strategies for Kaulkin Ginsberg’s Strategic Advisory team. Michael can be reached directly at 240-499-3808 or by email.  You can also read his other blogs/articles at http://www.insidearm.com/go/blogs/Lamm.