Encore Capital to Acquire UK ARM Firm Cabot for $192 million

Making a bid for global accounts receivable management domination, Encore Capital Group (NASDAQ: ECPG) — already one of the largest ARM firms in the U.S. — announced today that it will acquire a controlling stake in UK debt buyer Cabot Credit Management (CCM) for $192 million.

The deal comes only two weeks after Cabot was sold to private equity funds controlled by J.C. Flowers & Co. LLC.

In the Encore deal announced today, J.C. Flowers is selling a 50.1 percent interest in Cabot to Encore for about $192 million. Encore has the option to purchase the remaining company interest over the next four to six years. Funds controlled by J.C. Flowers also have an ownership stake in Encore’s stock.

CCM, a market leader in the U.K. and Ireland, represents an attractive opportunity for Encore to deploy capital globally in a market with strong growth potential. The U.K. is the largest mature debt purchase market in the world after the United States. Additionally, CCM has a 14-year track record of delivering steady growth.

CCM has purchased over 3.5 million individual consumer accounts, with a face value of over £7.7 billion ($11.7 billion). Its 2012 revenues were £161 million ($245 million), and its revenue growth from 2010-2012 was 11 percent per year.

“The combination of Encore and Cabot Credit Management creates a global leader in the consumer debt purchase and recoveries industry”, said Encore’s President and incoming CEO Ken Vecchione. “Encore has been looking for a strong partner in the U.K. for several years – one that is a leader, has a strong management team and has the ability to leverage our analytic capabilities and efficient operating platform. We’ve found all of this in Cabot Credit Management.”

Encore said that Cabot will continue to be a stand-alone entity. It will retain its current staff and brand and continue to be run as its own company.

Neil Clyne, CCM’s chief executive officer, said, “We believe Encore is a great strategic fit for our company. Their strong operating advantages will allow the investments we’ve made to be even more profitable, and we look forward to the opportunities we’ll have to learn from one another.”

With the acquisition of U.S. rival Accept Acceptance expected to close soon and the Cabot deal closing in the third quarter, Encore is positioning itself to be one of the largest ARM companies in the world come Fall 2013.