Merger and acquisition deals in the ARM industry are projected to continue to grow from the fourth quarter into 2021.
11/11/2020 7:45
ACA International member company Corporate Advisory Solutions (CAS) notes increased merger and acquisition activity in the accounts receivable management (ARM) industry this year. The firm sees this activity continuing into fourth quarter 2020, according to its Third Quarter 2020 Tech-Enabled Outsourced Business Services Market Report.
“We are aware of several ARM companies that have either already entered the market or will soon be entering the market as sellers, and there are strategic and financial buyers who remain interested in pursuing deals with good companies,” said CAS Managing Partner Michael Lamm. “We expect this market trend to continue into 2021, and buyer interest to remain focused on companies who weathered the pandemic and sustained their performance.”
There were 39 mergers and acquisitions with a combined value of more than $2.5 billion in the third quarter compared to 16 deals with a combined value of just less than $1 billion in the second quarter, according to the report.
“We have also been receiving multiple calls from larger ARM companies who would be very interested in acquiring under-performing, smaller ARM companies with attractive clients,” Lamm said. “With the ongoing pandemic and recent presidential election, there is greater uncertainty for the regulatory environment and liquidation impact. This is making forecasting for 2020 and 2021 increasingly challenging. Buyers will continue to look to alleviate the difficulties of forecasting performance for 2020 and 2021 with greater levels of deal structure.”
According to Lamm, “the election also creates a unique dynamic for timing as Joe Biden’s campaign has proposed to apply a 39.6% rate on long-term capital gains tax (for income over $1 million), which is a large jump from the current 20%. This can potentially lower the net proceeds of a sale , prompting some companies to accelerate their plans to close before the new tax rates go into effect.”
Read more in the Third Quarter 2020 Tech-Enabled Outsourced Business Services Market Report.
Michael Lamm, managing partner of CAS, hosts the ACA Cast podcast series Leadership Fuel With Michael Lamm. He is also a frequent contributor to ACA International's award-winning Collector magazine.