2. 2
16 M&A
Transactions
Intrum Most
Acquisitive
with 3 M&A
Transactions
€1.7bn in
Disclosed M&A
Transaction
Value
€5.3b in Bonds
Issued
8 M&A
Transactions
in Italy
2017 Corporate Reorganisation and
Capital Markets Activity in Review
▪ We observed 16 M&A transactions in 2017, similar in volume to 2016
with 17 transactions.
▪ A total of €1,690.0m(1) in value changed hands in 2017 in M&A
transactions. However, a large chunk of this was the sale of Intrum’s
Nordic Carve-out Business to Lowell Group as an extension of the
merger of Intrum Justitia and Lindorff. Excluding this large deal, total
M&A value in 2017 was approximately €960.0m(1), compared to
736.9m(1) in 2016.
▪ Italy was the most attractive M&A destination with 8 deals on top of
the DoBank IPO. Furthermore, news sources reported that the former
CEO of Intesa Sanpaolo is contemplating a €400m special purpose
acquisition company (SPAC) to finance the development and
restructuring of SMEs and buy their bad loans.
▪ Intrum was the most acquisitive player in Europe with three
transactions in 2017, including the purchases of CAF (Intrum), Gextra
(Lindorff) and Top Factoring (Intrum Justitia).
▪ Main M&A drivers in 2017 were (i) establishing/bolstering specific
market presence, (ii) market share consolidation and (iii)
diversification.
▪ We noted the initial public offerings of DoBank and GetBack in Italy
and Poland, respectively, while the planned IPO of Cabot CM in the
UK was pulled due to unfavourable market conditions.
▪ European players raised approximately €5.3b through the issue of
bonds, while roughly €3.0b was related to the merger of Intrum
Justita and Lindorff.
▪ We’ve seen new co-investment models emerge in the example of the
Portfolio Investment Company established by Axactor and Geveran
Trading.
▪ European debt purchase activity continued to be competitive, leading
to notably lower purchases for PRA Group and Idem Capital in 2017
compared to 2016.
2 IPOs
(1) Based on disclosed values only.
3. Q4 Corporate Reorganisation and
Capital Markets Activity
Recent M&A Activity focused on Italy and Spain
Italy continued to attract new investment in the last quarter. On 3rd
December, Intrum announced the acquisition of CAF, along with a
diversified debt portfolio serviced by CAF, from Lone Star for a
consideration of €200m. This transaction followed the sale of BMPS
Credit Servicing Platform to Quaestio Holding and Cerved Group,
Prelios to Davidson Kempner, Gextra to Lindorff (Intrum) and Heta Asset
Resolution to Bain Capital Credit as well as the sale of a 33% stake in
Guber to Varde and a stake in Sistemia to KKR .
On 30th November, B2Holding announced its entry into the Spanish
market through the acquisition of 80% shares in Verfica. Madrid based
Verifica Verifica has three main business areas, which include debt
collection management, telemarketing for loans and credit cards, and
surveillance and non-payment prevention services. B2Holding has an
option to acquire the remaining 20% shares.
On 24th November, Banca IFIS announced that they entered into an
agreement to acquire Cap.Ital.Fin. Spa, a company that specialises in
pension and salary-backed loans and payment delegations. The
acquisition allows Banca IFIS to expand its product range for its clients.
On 2nd November, Intrum entered into a definitive agreement with Lowell
to divest the Nordic Carve-out Business. The business is valued at
€730m on an EV basis, with estimated cash proceeds of about €700m to
be received by Intrum.
For the last twelve months to Q3’17 the Carve-out Business had
revenues of €190m, an adjusted EBITDA of €118m and an debt portfolio
with a book value of ~€400m at the end of the period. The business also
had a 180m ERC of €868m. These translate into EV/180m ERC and
EV/LTM Adj. EBITDA multiples of 0.85x and 6.2x, respectively.
The transaction is expected to close in the first half of 2018.
New Co-Investment Models Driving Scale and Product Expansion
Following an announcement in August of the signing of a letter of intent,
Axactor and Geveran Trading entered into a co-investment partnership
in October and established a Portfolio Investment Company with €300m
investment capacity to invest into loan portfolios valued above €30m.
Geveran Trading is a company indirectly controlled by trusts established
by John Fredriksen for the benefit of his immediate family.
The Portfolio Investment Company was to be capitalised by each party
investing €60m in the form of income sharing notes, Geveran Trading
affiliates providing a 5-year €120m subordinated loan and a Nordic bank
providing a €120m senior facility, including a €40m accordion facility.
Axactor announced on 1 November 2017 that the Portfolio Investment
Company closed a primary transaction in Spain where it acquired an
unsecured debt portfolio with €300m nominal value, a secured debt
portfolio with €94m nominal value and a real estate portfolio with €40m
appraisal value.
Disappointments in Equity Markets
Encore Capital Group announced at the beginning of this year that
preparations were underway for a listing of Cabot Credit Management in
late 2017. In May, news reports indicated that advisors have been hired
by Cabot CM’s shareholders to oversee a float. While Cabot targeted a
listing in November, later press reports informed that the bankers
working on the float had difficulty placing the shares within the price
range of 201-260p, corresponding to an equity valuation between £830-
1
4. 981m. Encore Capital later announced that Cabot CM has decided to not
go forward with its previously announced initial public offering as a result
of unfavourable equity market conditions in the U.K.
According to its 3Q 2017 results, Cabot CM had an LTM adjusted
EBITDA of £282m and net debt of £1,181m. The company also had 120
and 180m ERC of £2.3bn and £2.6bn, respectively. Considering the
pursued equity value between £830-981m, these would translate into an
EV of £2,010-2,161m or 7.1-7.6x LTM adjusted EBITDA and 0.77-0.83x
180m ERC.
Cabot’s failed IPO attempt does not necessarily mean that the capital
markets are now closed for debt purchasing and servicing companies.
Lowell Group indicated that they are considering an IPO, with Collin
Storrar, the CFO, quoted saying that “an IPO is an option.”
Also, in December, news sources reported that Corrado Passera, former
economy minister and former CEO of Intesa Sanpaolo, is sounding out
investors about setting up a €400m special purpose acquisition company
(SPAC) to be listed on the Italian Exchange with the purpose of financing
the development and restructuring of small- and medium-sized
companies and buying their bad loans.The application of SPACs into
non-performing credit hasn’t seen many examples and Passera’s effort
may be significant in the sense that it is a pioneer example in this space
in Europe.
While new IPOs are being considered and since our last report date,
harmonic mean of sector P/E ratios based on 2018 estimate earnings
compressed, despite the approximately three-month time decay, to
11.2x from 11.4x, while P/E ratios based on 2019 forecast earnings
slightly expanded to 9.2x from 9.0x.
2
5. 2017 M&A Activity
4
Date Target Buyer Description
Source: Companies’ reports, Factset, public news.
26/10/17 Aiqon Capital Spain Link Financial 100.0% n.a. Link Financial Group bought a specialist loan servicing
platform, Aiqon Capital Espana. Based in Madrid, the
110 people strong team will add further capacity to
Link's existing Spanish business, Link Finanzas.
2/11/17 Intrum’s Nordic
Carve-out
Business
Denmark,
Estonia,
Finland,
Norway,
Sweden
Lowell Group 100.0% 730.0 Intrum entered into a definitive agreement with Lowell
to divest the Carve-out Business. The Carve-out
business is valued at €730m on an EV basis, with
estimated cash proceeds of about €700m to be
received by Intrum. LTM to Q3’17 the Carve-out
Business had revenues of €190m, EBITDA (excl. non-
recurring items) of €55m and a debt portfolio with a
book value of ~€400m at the end of the period.
Target
Origin
% Interest
Acquired
Implied Business
Value (€m)
03/12/17 CAF Italy Intrum 100.0% 200m Intrum agreed to acquire CAF, the third largest servicer
of non-performing loans in Italy, along with a diversified
debt portfolio from Lone Star for €200m on a cash and
debt-free basis. The service business, excluding
returns on investments in portfolios, is expected to
have revenues of about EUR 30 million with an
EBITDA of about EUR 11 million in 2018.
30/11/17 Verifica Spain B2Holding 80% n.a. B2Holding acquired 80% of the shares of
Confirmaciónde Solicitudes de Crédito Verifica
("Verifica"), with an option to acquire the remaining
20% shares. Verifica is active in debt collection
management, Telemarketing for loans and credit cards
and Surveillance and non-payment prevention.
24/11/17 Cap.Ital.Fin Italy Banca IFIS n.a. n.a. Banca IFIS announced the acquisition of a controlling
stake in Cap.Ital.Fin S.p.A., which specializes in
pension-backed loans, salary-backed loans for retirees
and private, public and state employees, and payment
delegations. At the end of 2016, Cap.Ital.Fin had net
banking income of €3.1m and its equity stood at €2.4m.
6. 2017 M&A Activity (Cont’d)
Source: Companies’ reports, Factset, public news.
(1) Including an earn-out of €33.8m, based on the achievement of certain results until 2025. 5
Date Target Buyer Description
28/04/17 EGB Investments Poland GetBACK 100.0% 54.1 GetBACK acquired approximately 99.4% stake in EGB
Investments SA from ALTUS TFI SA for PLN 207.6m in
cash and purchased the remaining 0.6% shares
through a squeeze out later in September.
04/05/17 Gextra Italy Lindorff
(Intrum)
n.a. n.a. DoBank agreed to sell Gextra to Lindorff. Gextra is a
specialised player in small debt collection services and
is controlled by doBank through Italfondiario. It had
earnings of approximately €4.4m in 2016.
25/07/17 MCS Groupe France BC Partners 100.0% 380.0 BC Partners signed a put option agreement relating to
the acquisition of 100.0% of Promontoria MCS Holding,
from Cerberus, managers of the MCS Groupe and
Arrow Global.
Target
Origin
% Interest
Acquired
Implied Business
Value (€m)
26/07/17 Prelios Italy Davidson
Kempner
44.9% 179.4 Davidson Kempner Capital Management, signed an
agreement with Pirelli, Intesa Sanpaolo, UniCredit and
Fenice to purchase 44.9% of Prelios at EUR 0.116 per
share, corresponding to an equity value of €71.0m.
02/08/17 BMPS Credit
servicing
platform
Italy Quaestio
Holding and
Cerved Group
100.0% 86.3(1) Quaestio Holding and Cerved Group reached a binding
agreement with Banca Monte dei Paschi di Siena to
acquire its credit servicing platform.
31/08/17 Mars Acquisition UK Arrow Global 100.0% 18.3 Arrow Global announced the acquisition of Mars
Capital's UK and Irish mortgage servicing businesses
for an enterprise value of £15.5m and the
establishment of a strategic partnership in the UK and
Ireland with Oaktree Capital Management.
24/08/17 Wescot UK Cabot 100.0% 97.6 Cabot Credit Management entered into an agreement
to acquire Wescot, a UK contingency debt collection
and business process outsourcing services business.
7. 2017 M&A Activity (Cont’d)
Source: Companies’ reports, Factset, public news.
6
Date Target Buyer Description
21/02/17 Heta Asset
Resolution Italia
(HARIT)
Italy Bain Capital
Credit
100% n.a. Bain Capital Credit (through their wholly owned Irish
holding platform) completed the acquisition of Heta
Asset Resolution Italia S.r.l. including all outstanding
loans, from HETA Asset Resolution AG.
03/04/17 Top Factoring Romania Intrum Justitia
(Intrum)
92.0% 25.0 Reconstruction Capital sold its 93.0% interest in Top
Factoring, a Romanian receivables collection company,
and (ii) the NPL book held by Glasro Holdings to Intrum
Justitia for an enterprise value of ~€25.0m (equity
consideration of ~€13.9m).
Target
Origin
% Interest
Acquired
Implied Business
Value (€m)
29/03/17 Guber Italy Varde
Partners
33.0% 142.4 Varde Partners signed an agreement to buy a 33%
stake in Guber, an independent servicer in Italy with
about €7.4bn AuM. Varde paid €47m for its stake and
founders Francesco Guarneri and Gianluigi Bertini will
retain the remaining 67% stake.
12/04/17 Sistemia Italy KKR n.a. n.a. KKR has bought a stake in Sistemia, an Italian
servicing company. The financial details of the
transaction were not disclosed.
8. 2017 ECM Activity
Date Company Issue Venue Price/Share
# of Shares
Offered Gross Proceeds Managers
7
Source: Companies’ reports, Factset, public news.
27/09/17 Axactor Private
Placement
(Tranche-2)
Oslo Stock
Exchange
NOK 2.49 164,400,000
12/07/17 DoBank IPO Borsa Italiana EUR 9.00 34,700,000
04/07/17 GetBACK IPO Warsaw Stock
Exchange
PLN 18.50 40,000,000
NOK 409.4m
EUR 312.3m
PLN 740.0m
DNB Markets
Haitong
Citigroup, J.P. Morgan, Unicredit
17/08/17 Axactor Private
Placement
(Tranche-1)
Oslo Stock
Exchange
NOK 2.49 75,600,000 NOK 188.2m DNB Markets
Withdrawn Cabot CM IPO London Stock
Exchange
TBD TBD GBP 195.0m(1) Goldman Sachs Intl., Morgan
Stanley, Jefferies, Numis and
Lazard (financial advisor)
9. 2017 DCM Activity
8
Source: Companies’ reports, Factset, public news.
(1) Yield information as of 5 January 2018.
Date Issuer Security Ccy Coupon
17/10/17 Banca IFIS EUR 400.0m Subordinated Notes EUR 4.50%
Latest YTW(1) Managers
Nomura, UBS, Unicredit
Term
17/10/27
04/10/17 Hoist Credit EUR 250.0m Senior Unsecured EUR 1.125% Citi, Deutsche Bank, Nordea04/10/21
16/08/17 GetBACK PLN 40.0m Senior Unsecured PLN WIBOR
+400bps
n.a.16/02/21
30/06/17 GetBACK PLN 40.0m Senior Unsecured PLN WIBOR
+420bps
Haitong30/12/20
26/06/17 Intrum SEK 3,000m Senior Unsecured EUR 3m STIBOR
+275bps
Goldman Sachs Intl., J.P.
Morgan, Morgan Stanley, Danske
Bank, Deutsche Bank, DNB
Markets, Nordea, Nykredit, UBS
15/07/22
26/06/17 Intrum EUR 900.0m Senior Unsecured EUR 3.13% Goldman Sachs Intl., J.P.
Morgan, Morgan Stanley, Danske
Bank, Deutsche Bank, DNB
Markets, Nordea, Nykredit, UBS
15/07/24
20/09/17 Lowell Group EUR 415m Senior Secured EUR EURIBOR
+350bps
3.92% J.P. Morgan, Credit Suisse01/09/23
28/09/17 MCS Groupe EUR 270m Senior Secured EUR 4.25% Credit Suisse, Societe
Generale, KKR
30/09/24
Amount
02/11/17 B2 Holding EUR 200.0m Senior Unsecured EUR EURIBOR
+425bps
Arctic Securities, DNB Markets,
Nordea
17/10/27
n.a.
4.31%
3.90%
1.17%
7.50%
n.a.
16/10/17 GetBACK PLN 25.0m Senior Unsecured PLN WIBOR
+400bps
n.a.30/04/21 7.71%
0.99%
2.78%
10. 2017 DCM (Cont’d)
9
Source: Companies’ reports, Factset, public news.
(1) Yield information as of 15 December 2017.
(2) Changed from 2.875% to 2.546%.
Date Issuer Security Ccy Coupon
19/05/17 Hoist Credit EUR 80.0m Subordinated Notes EUR 3.88%
Latest YTW(1) Managers
Deutsche Bank, Nordea
Term
19/05/27
10/05/17 GetBACK PLN 60.0m Senior Unsecured PLN 6.13% Haitong10/15/20
29/03/17 Arrow Global EUR 400.0m Senior Unsecured EUR 2.55%(2) J.P. Morgan, Goldman Sachs
Intl., HSBC, DNB Markets, ABN
Amro, Lloyds Bank, Morgan
Stanley, NatWest Markets
01/04/25
26/03/17 Banca IFIS EUR 300.0 Senior Unsecured EUR 1.75% Intermonte26/05/20
26/06/17 Intrum EUR 300.0m Senior Unsecured EUR 3m EURIBOR
+262bps
Goldman Sachs Intl., J.P.
Morgan, Morgan Stanley, Danske
Bank, Deutsche Bank, DNB
Markets, Nordea, Nykredit, UBS
15/07/22
Amount
26/06/17 Intrum EUR 1,500.0m Senior Unsecured EUR 2.75% Goldman Sachs Intl., J.P.
Morgan, Morgan Stanley, Danske
Bank, Deutsche Bank, DNB
Markets, Nordea, Nykredit, UBS
15/07/22 2.32%
1.52%
2.47%
n.a.
2.79%
1.15%
11. Competitive Landscape in Europe (Servicing)
Arrow Global ● ● ● ● ● ●
Axactor ● ● ● ● ●
Banca IFIS ●
B2 Holding ● ● ● ● ●
Cabot ● ● ● ●
doBank ●
EOS ● ● ● ● ● ● ● ●
getBack ●
Hoist Finance ● ● ● ● ● ● ●
Idem Servicing ●
Intrum ● ● ● ● ● ● ● ● ● ● ●
Kruk ● ● ● ●
Link ● ● ● ● ●
Lowell Group ● ● ●
MCS Groupe ●
PRA Group ● ● ● ● ● ●
Prelios ●
Savia ●
Benelux CEE France GAS Greece Ireland Italy Nordics Portugal Spain UK
10
Source: Companies’ reports, Factset, public news. Shaded areas represent recent M&A activity.
12. Competitive Landscape in Europe (Purchasing)
(All values in millions of EUR(1), unless stated otherwise)
120-month ERC(2)
CAGR
(%) Cash Collections
CAGR
(%)
NPL Portfolio
Acquisitions
CAGR
(%) Adjusted EBITDA
CAGR
(%)
2015 2016 2017(3) 2015-17 2015 2016 2017(3) 2015-17 2015 2016 2017(3) 2015-17 2015 2016 2017(3) 2015-17
Intrum(4) n.a. 3,596 4,092 n.a. n.a. 737 857 n.a. n.a. 507 778 n.a. n.a. 690 799 n.a.
Cabot 2,193 2,344 2,601 10.2 343 403 439 15.0 325 218 354 5.1 221 278 316 27.0
Hoist Finance 1,972 2,177 2,181 5.9 370 439 471 14.8 445 339 381 -8.4 245 297 319 16.3
Lowell Group 1,525 1,983 2,194 23.1 443 542 651 24.7 281 344 304 4.6 238 286 329 23.9
PRA Group
Europe(5) 1,719 1,778 1,849 4.3 291 336 347 10.7 357 624 170 -34.5 n.a. n.a. n.a. n.a.
Arrow 1,376 1,735 1,899 20.2 246 321 353 23.0 203 251 291 22.9 172 235 232 22.0
KRUK(6)
649 1,153 1,364 52.8 199 239 310 28.7 118 310 269 60.3 0 152 200 n.a.
Banca IFIS(7)
637 1,012 1,289 49.5 56 78 107 45.4 218 196 203 -4.7 n.a. n.a. n.a. n.a.
B2Holding 667 975 1,252 43.4 138 192 245 39.1 139 265 330 63.7 85 124 169 57.6
idem Capital 727 510 568 -15.2 n.a. n.a. n.a. n.a. 117 235 110 -3.6 n.a. n.a. n.a. n.a.
Axactor n.a. 264 484 n.a. n.a. 15 47 n.a. n.a. 129 162 n.a. 0 -2 20 n.a.
Source: Companies’ reports.
(1) All values in constant EUR, converted at the exchange rates as of 5 January 2018.
(2) This analysis is not intended to provide an exact comparison of the companies by generally used industry metrics but to provide a general view of the competitive environment and
industry dynamics. No standardised methodology in calculating these metrics exists and the exact calculation methodology may hence differ by company.
(3) 2017 data based on the most recent quarter’s report available.
(4) Figures are shown proforma for the merger including Lindorff’s full-year figures in 2016 and 2017, and adjusted for mandatory divestments.
(5) No indication given by PRA on ERC's recovery period, ERC assumed to represent 120-month ERC.
(6) KRUK 120-month ERC assumed to represent 95% of total ERC.
(7) Banca IFIS 120-month ERC calculated as 1.8x NPL book value for illustrative purposes. Banca IFIS did not disclose the value of its portfolio acquisitions in Q3 2017.
11
13. 12-Month Market Performance of Listed Players (NTM PE Ratios)
Source: Factset (prices and broker estimates as of 5 January 2018).
12
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