While the overall collections industry is healthy and poised for growth, smaller agencies are still likely to sell to larger companies because of increased compliance costs, according to the quarterly newsletter published by Corporate Advisory Solutions.
There were 10 mergers or acquisitions in the third quarter of 2016, comprising $679 of “enterprise value,” as reported by CAS. And as the Consumer Financial Protection Bureau moves forward with a rule that will further regulate the collections industry, more M&A activity is expected.
“The increased regulation will continue to drive sellers to seek to liquidate and/or consolidate into larger, more stable businesses,” the company wrote.
In the Revenue Cycle Management space, there were six deals completed in the third quarter, according to CAS, comprising $499 million of “enterprise value.”
The RCM space is expected to continue growing as healthcare costs keep rising, which is driving more organizations to outsource collections of unpaid medical bills. Healthcare premiums are poised to rise by as much as 25% next year, according to the Department of Health and Human Services.
“Furthermore, as competition increases within the space, it will become difficult for smaller RCM companies to continue to grow and survive unless they have a niche market specialization or sticky client relationships,” CAS wrote.