Do you remember playing the game Risk growing up? For those of you who never played, Risk is a classic strategy game played on a board illustration of a map of the Earth divided into territories that are grouped together into six continents. The object of the game is to gain world dominance by occupying every territory on the board. Players use armies to capture additional regions and eliminate their opponents. The game of Risk has up to 6 players competing at the same time for world dominance.
In the real world of debt purchasing, there are currently two U.S. players who are aggressively positioning their company for world dominance. In one of the largest acquisitions in ARM history, Portfolio Recovery Associates (NASDAQ: PRAA) announced late Wednesday that it would acquire Norway-based debt buyer Aktiv Kapital for $1.3 billion.This announcement came on the heels of Encore Capital Group (NASDAQ: ECPG)’s announcement earlier this month that it will acquire UK-based debt buyer Marlin Financial Services for £295 million (approximately $481 million). Last year, Encore acquired US based Asset Acceptance for $200 million before turning around and purchasing a controlling stake in UK debt buyer Cabot Credit Management (CCM) for $192 million.
While these transactions are significant and worth watching closely, this level of deal activity is nothing new for the ARM industry.
When I first entered the debt collection industry nearly 25 years ago, the industry powers were Payco and FCA. They moved around by aggressively gobbling up smaller and mid-size collection agencies expanding to their prominent positions. Shortly afterwards, Union Corp joined the game, acquiring some of the largest companies of its time. This occurred for nearly a decade before NCO went public and aggressively pursued their own aggressive acquisition strategy and before private equity aggressively moved toward consolidating the ARM industry by acquiring most of the largest companies of its time. In fact, from 1996 to 2006 all of the top 10 players of that era with the exception of GC Services went through at least one significant transaction.
The recent flurry is different in large part because it is happening on a global stage and it is happening among debt buyers. More moves will follow, perhaps among the 2 players that are already playing the game and likely additional players who will join the game shortly. Who will make the next move?