Collector – October 2019 - 19

"Don't let the fact that you have to do something
quickly prevent you from assessing the issues
at hand to protect yourself."

depending on the negotiation and what
is required to help close the deal. Many
distressed asset deals focus on "pay
for performance" and making sure the
client operation can stay in place so
the buyer can help turn the situation
around and make a good return.

WHAT QUESTIONS SHOULD A
BUYER ASK?
A number of issues are usually at play with
a distressed situation: a client loss, a legal
problem, the departure of key staff or an
upside down balance sheet. The key is to
figure out, as quickly as possible, if you can
help solve the problem on a timeline that is
going to work for everybody.
When distressed situations come
up, the selling shareholders are looking
to move as quickly as possible. This
compresses the due diligence timeline and
overall buying process, and is often why
red flags get missed.
Focus on your upfront elevation and ask
yourself the following questions:
1. Does the company have good financial
controls in place?
2. Can you salvage relationships with the
clients who continue to place accounts?
3. If the company in question is a debt
buyer, is there more runway in the
portfolio to collect out what they think
will be there as a part of the estimated
remaining collections analysis?
The more pain points you can identify-
and, ideally, develop solutions for-the
better off you will be after closing the deal.

STAY FOCUSED
In the past two to three years, most
distressed situations have been in the

COLLECTOR 10.19

financial services sector. That should
be changing as we begin to see more
companies struggle in other markets.
Often they are overleveraged or their
balance sheet is filled with a lot of debt
they aren't able to service because of
regulatory and compliance changes in
the ARM industry.
These trends will be even more
consistent once the market has a
correction, especially among some
of the smaller and midsized ARM
companies. They are usually at risk
because they are on the bubble inside of
a large agency network for a big creditor,
and they get downsized as part of the
network consolidation.
When the market correction arrives-
and this is certainly a question of when,
not if-some of these companies will get
a large amount of placement volume that's
less collectible. As a result, staffing and
operational structure will be off balance.
The most important takeaway for
potential buyers? Do your due diligence
when purchasing a distressed ARM
company. Don't let the fact that you
have to do something quickly prevent
you from assessing the issues at hand
to protect yourself. By remaining
disciplined, distressed situations can be
a win-win for both sides.
Michael Lamm is managing partner at
Corporate Advisory Solutions, a boutique
merchant bank with offices in Philadelphia
and Washington, D.C. Lamm hosts the
ACA Cast podcast series Leadership Fuel
With Michael Lamm. He can be reached
at mlamm@corpadvisorysolutions.com or
(202) 904-7192.

1

A market correction or
recession puts smaller and
midsize ARM companies at
risk if they are on the bubble
inside an agency network for
a big creditor. Downsizing is
common.

2

When a distressed
company is having
compliance problems, buyers
should consider looking at an
asset purchase rather than a
stock deal.

3

After a purchase, retain
key staff to ensure there
is no disruption to client
relationships.
19



Collector – October 2019

Table of Contents for the Digital Edition of Collector – October 2019

President’s Page
Industry News
Best Practices
FYI
Collection Tips
Accessibility From Every Angle
Information Transformation
Calendar
Honor Roll
Education Spotlight
Behind the Name
A.I. is Transforming Compliance. Are You Ready?
What to Watch in 2020
ACA’s Industry Advancement Program Provides Amicus Support in Key FDCPA Statute of Limitations Issue
ACA SearchPoint
Ad Index
Membership
Last Word
Collector – October 2019 - Cover1
Collector – October 2019 - Cover2
Collector – October 2019 - 1
Collector – October 2019 - 2
Collector – October 2019 - 3
Collector – October 2019 - 4
Collector – October 2019 - President’s Page
Collector – October 2019 - Industry News
Collector – October 2019 - 7
Collector – October 2019 - 8
Collector – October 2019 - 9
Collector – October 2019 - Best Practices
Collector – October 2019 - 11
Collector – October 2019 - FYI
Collector – October 2019 - 13
Collector – October 2019 - Collection Tips
Collector – October 2019 - 15
Collector – October 2019 - 16
Collector – October 2019 - 17
Collector – October 2019 - 18
Collector – October 2019 - 19
Collector – October 2019 - Accessibility From Every Angle
Collector – October 2019 - 21
Collector – October 2019 - 22
Collector – October 2019 - 23
Collector – October 2019 - Information Transformation
Collector – October 2019 - 25
Collector – October 2019 - 26
Collector – October 2019 - 27
Collector – October 2019 - 28
Collector – October 2019 - 29
Collector – October 2019 - Calendar
Collector – October 2019 - Honor Roll
Collector – October 2019 - Education Spotlight
Collector – October 2019 - 33
Collector – October 2019 - Behind the Name
Collector – October 2019 - 35
Collector – October 2019 - A.I. is Transforming Compliance. Are You Ready?
Collector – October 2019 - 37
Collector – October 2019 - What to Watch in 2020
Collector – October 2019 - 39
Collector – October 2019 - 40
Collector – October 2019 - 41
Collector – October 2019 - ACA’s Industry Advancement Program Provides Amicus Support in Key FDCPA Statute of Limitations Issue
Collector – October 2019 - 43
Collector – October 2019 - ACA SearchPoint
Collector – October 2019 - Ad Index
Collector – October 2019 - Membership
Collector – October 2019 - 47
Collector – October 2019 - Last Word
Collector – October 2019 - Cover3
Collector – October 2019 - Cover4
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