As the ARM industry begins to consolidate and evolve as a result of a new regulatory paradigm, so do the businesses involved in debt purchasing and debt collection. As a consultant, debt broker and M&A consultant for the ARM industry I see many collection agencies and law firms in both their best and worst of times. Often as a consultant I am engaged and when things are not going well and as a debt broker the opposite is usually the case. When I am doing mergers or acquisitions usually there is someone with a large stack of chips and performing at the top of their game and someone on the other side with a few chips left.
Historically the collection industry has always been an industry that has ebbed and flowed based on inventory levels. When a collection agency or law firm was able to get a large amount of quality placements they would be at a high with lots of chips sitting in front of them. Conversely, when the chips in front of you or your placements are low, the business becomes more challenging and less profitable. The one thing I have consistently noticed over the years is the businesses that were willing to spend their chips on performance enhancements would gain market share and therefore a larger stack of chips.
Until a few years ago the collection business was based upon only two factors; your ability to perform and your ability to provide an ever growing pool of placements. With the onset of onerous levels of regulation, the business has changed again and taken many of the chips off the table, even for the most established and profitable firms in the market. As issuers and debt buyers reduce the amount of placements available to the market, there are less poker games and fewer chips available. This is what will drive the consolidation and evolution of the industry in 2014.
In a market of tight supply, the players remaining will need to be more strategic about how they go about amassing chips in front of them. In this environment, there is a need to change the business model in order to succeed.
The game has changed and it now it now favors the bigger players with deeper pockets that can satisfy the needs of the issuers and debt buyers. These stakeholders want the players to be able to handle the intense regulatory scrutiny in today’s marketplace which requires a significant stack of chips and a higher ante into the game. The stakes are much higher and the cost of entry has also increased but the payoffs scream for the effort to be made.
The small guy who is selling his business to the guy with lots of chips will increase his chip share while the buyer will reduce their stack. The hope is by combining forces they will be a stronger partner and able to survive the ups and downs of the game. The business will truly fluctuate just like your chips at the Las Vegas poker table and just like the poker table the trick is to be strategic with your moves and know when to fold ‘em and cash out.
If you are looking to increase the chips in front of your business then call Lighthouse Consulting for some inside tips. We will be able to help you make the strategic moves that will allow you to end up with the biggest stack of chips.
Lighthouse Consulting has been providing solutions to operational compliance challenges and M&A consulting for ARM companies for over a decade. Contact Phillip Duff, CEO of Lighthouse Consulting today and let us help you navigate the compliance landscape.
Phillip Duff, CEO | www.LighthouseConsultingInc.com | Phil@LighthouseConsultingInc.com | (904) 687-1687