1. M&A Trends in the ARM Industry

2. Discussion Topics The Pace of Consolidation in the U.S.
ARM M&A Activity
Pricing Trends
Predictions

3. The Pace of Consolidation in the U.S.
Reasons for the Slowdown:
Clients require competition.
Collectors are entrepreneurs.
Need for collectors in a credit economy.

4. ARM M&A Activity Major M&A Trends Shaping ARM
The impact of the CFPB was and continues to be damaging.
Buyers that avoided financial services returned.
The Department of Education brought student loan M&A to a halt.
Debt buyers changed their strategy.

5. Size of Acquired Company ($Revenues)
Pricing Trends
Size of Acquired Company ($Revenues)
Small
(<$5m)
Mid-Sized
($5m-$20m)
Large
($20m-$100m)
Platform
($50m+)
Multiples
2-4 x SDE*
3-6 x Adj. EBITDA**
5-8 x Adj. EBITDA**
5-12 x Adj. EBITDA**
Structure
0%-100% cash
25%-100% cash
60%-100% cash
* SDE = Seller’s Discretionary Earnings (Seller compensation + normalized expenses combined with EBITDA)
** Adj. EBITDA = Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization, adjusted for normalized executive salaries and non-recurring and excess expenses that would not exist post-transaction
Some companies are selling for little or no cash.
Underperformers are vogue.
Niche companies are attracting higher multiples.
Client concentration influences pricing.

6. Predictions
Fewer collection agencies and debt buyers will start up as a clear barrier-to-entry now exists for new entrants.
Trump will significantly alter Dodd-Frank, having a positive effect on ARM M&A.
Buyers will return to the student loan market if the Department of Education figures ever gets its act together.
Federal contracts, including IRS and the Department of Treasury, could easily become the largest source of new business to third-party agencies for the next decade.
Emphasis on regulatory compliance will continue to be a boon for technology vendors.
Associations will suffer from the impact of a contracting industry.

7. Disclaimer
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8. M&A Trends in the ARM Industry