JC Flowers & Company LLC: $2.3bn under management Cabot Credit Management Group Ltd Market Cap: N/A
Deal size: £800mln
On 15th of May it was announced that funds managed and advised by JC Flowers & Company LLC have acquired Cabot Credit Management Group Ltd. in a secondary buyout from AnaCap Financial Partners LLP and its co-investors, Morgan Stanley Alternative Investment Partners and Partners Group.
Despite no official announcement has mentioned the real value of the deal, the sale has given Cabot an enterprise value of £800mln, including debt, and has not only doubled AnaCap’s original investment but also marked the biggest deal ever by JC Flowers in the UK.
Cabot is a market leading acquirer and manager of consumer debt in the United Kingdom and Ireland, specialized in debt purchase, contingency collections and customer tracing with a key focus in semi-performing debt.
Over the past year Cabot, which has over £7.7bn of assets under management, showed a 13% increase in revenues, driving a year-on-year EBITDA lift of 23%. As a further demonstration of the momentum of the company, the debt firm issued a £265m senior secured note in September to fund its business activities and buy up credit portfolios.
In fact, the debt purchasing and debt collection market is benefiting from the long-term trend of banks, telecom companies, utilities and other consumer credit providers that are outsourcing parts of their debt management process. This sell-off is mainly due to the Eurozone debt crisis and more stringent capital requirements imposed by regulators that have put under pressure the majority of financial institutions.
In anticipation of a big sell-off by lenders, private equity groups have raised dedicated funds to buy European banking assets. However, the wave of deals has been slow to materialize, partly because emergency liquidity from the European Central Bank allowed lenders to buy more time. In fact, according to recent studies, a high percentage of banks, which now result in line with the incoming Basel III would not be so without the massive liquidity that have been injected in the market.
Under this perspective it seems possible that JC Flowers will be able to take advantage of acting as a first mover in this kind of deals. Moreover, this acquisition may finally allow JC Flowers to grow in the UK market and create synergies with the previous investments, such as the regional bank One Savings Bank, and shake off a series of bad investments that have recently marked some of its more recent funds.
Citigroup acted as financial advisor of the vendor in the deal.