Arrow Global Group, a UK-based buyer of delinquent debt from credit card companies and banks, will acquire rival Capquest from a private equity fund for $258 million, the company announced.
Arrow Global officials said the combined firm will create a European debt buying and collection business with $25 billion in face value of receivables under management. The acquisition announced this week brings together Arrow Global's 5.4 million owned customer account records with Capquest's 2.8 million total.
The deal is subject to the approval of Arrow Globals shareholders. Capquest is owned by TowerBrook Capital Partners.
Goldman Sachs has provided committed financing for the acquisition's proposed debt raise, which also will provide Arrow Global with cash to fund further debt portfolio purchases.
The Capquest acquisition is the year's second major instance of consolidation in the sector to be financed in the debt markets.
Encore Capital Group Inc., a large U.S.-based debt buyer, announced in February the acquisition of UK-based debt buyer Marlin Financial Services for approximately $481 million through Cabot Credit Management, a UK subsidiary of Encore acquired last year.
Arrow Global and Capquest officials said both brands will be kept. Capquest is known for an in-house servicing platform and a state-of-the-art collections system. It will be enhanced by Arrow Globals leadership in data enhancement, analytics and supply chain management, the companies reported.
"The acquisition positions us well to enhance the quality of our offering to our customers and clients," said Tom Drury, CEO at Arrow Global. "Bringing together Capquests sophisticated and customer-focused in-house collection capabilities with Arrow Globals master servicing model and leadership in data and analytics is an important step in achieving our vision of being Europes leading debt purchaser and manager. It adds a significant portfolio of assets at attractive returns, supports our broad range of origination sources and extends our reach into new asset classes."
Helen Ashton, CEO at Capquest added: "Our experience in regulated environments, strong reputation for compliance and commitment to socially-responsible practices, together with our understanding of our customers needs, makes Capquest an attractive partner for Arrow Global. I believe our combined businesses will create a strong company, well placed to prosper in the current environment."
Arrow Global started trading its shares on the London Stock Exchange a year ago. The companys stock launched at $3.30 (205 pence) per share. Arrow at the time of the IPO owned and managed an estimated $12.5 billion of delinquent consumer debt.
The IPO raised an estimated $305 million, $80 million going to the company. The initial share price valued the business at $576 million.
The company's work mostly involves using technology and data analytics to identify and track down debtors when their contact information has been lost by original lenders. Once it has the information it uses third-party collectors to pursue the debt.
The largest UK debt purchasers include: Arrow Global, Capquest, Lowell Group, Cabot Credit Management, Marlin Financial Group, Link Financial and Max Recovery.