Tom Drury, Arrow Global chief executive officer

 

Debt purchaser Arrow Global has acquired the business of Capquest, creating a combined entity with some £1.1bn in 120-month Estimated Remaining Collections (ERC).

 

Capquest was purchased with an enterprise value calculated at £158m, a figure representing 70% of its £224m 120-month ERC, and 4.6 times its last reported 12-month EBITDA of £34m.

 

Speaking exclusively to Credit Today, Arrow Global chief executive officer Tom Drury said the deal, which has “moved fairly quickly” since its inception earlier this year, has made Arrow the second debt purchase business in the UK to achieve a 120-month ERC of more than £1bn.

 

Drury commented it was “Important to maintain scale in a consolidating market”, adding that the purchase would also develop Arrow’s business model through use of the “strong and compliant” Capquest platform.

 

 

 

2013 saw Capquest undergo significant technological investment and a full rebrand under the leadership of chief executive Helen Ashton, who will join the Arrow leadership team.

 

Arrow intends to put more of its own business through the Capquest platform; while Arrow currently outsources all collections, the addition of the CapQuest platform will lead to 40% of Arrow’s collections work being conducted in-house, with the remainder outsourced “in the traditional Arrow way”.

 

While Capquest’s offices in Glasgow and Farnborough will be retained, with increases in headcount planned for both, it is not known whether all of its management team will remain in the business, due to duplication of roles.

 

The deal is expected to broaden Arrow’s appetite for different types of portfolios, a trend already demonstrated by its purchase of student loan books.

 

“From an origination point of view, Capquest is active in some asset classes we don’t currently operate in” Drury commented, making specific mention of the motor finance market, where Capquest recently acquired the remaining book and business of subprime lender BCT.

 

The acquisition will add 2.8 million customer accounts to Arrow’s current total of 5.4 million (although some crossover is expected), while a combination of removing duplicated overhead costs and platform optimisation is expected to realise operational savings of £6.5m for the combined business.

 

Last month, Arrow Global reported interim results for the six months to 30 June, including core collections up 10.9% year-on-year to £69.3m, and adjusted EBITDA up 10.6% to £48m. A maiden interim dividend of 1.7p per share was declared, while portfolio purchases in Portugal increased 120-month ERC 27% to reach £827.3m.

 

The acquisition of Capquest by Arrow is the latest in a string of major acquisitions in the debt purchase market: in February, Cabot Credit Management acquired rival Marlin Financial Group, while US-based Portfolio Recovery Associates (PRA) acquired Aktiv Kapital.

 

Published 24 September 2014

http://www.credittoday.co.uk/article/17410/online-news/exclusive-arrow-acquires-capquest-for-158m

This smells very fishy indeed, where are they getting the capital from - or are they 'selling' the possible distressed debt portfolio on behind their backs.... I think this needs to be investigated by the FCA.