Biggest Debt Collector in Europe Opens Door to Larger M&A Deals

  • New CEO at Intrum Justitia reveals bolder acquisition strategy
  • Company says it’s targeting growth without adding risk

Intrum Justitia AB’s new chief executive officer says there’s no reason why Europe’s biggest debt collector shouldn’t adopt a bolder acquisition strategy and consider bigger credit management companies than it has focused on before.

Mikael Ericson, who started as CEO in March, says he doesn’t want to “set any limits.”

Mikael Ericson

Source: Intrum Justitia AB

“In theory, the dream is to make acquisitions that we can absorb in a rather easy way and thereby generate synergies early,” Ericson said in an interview. “We can also theoretically make acquisitions that are a bit bigger. They’re a bit more complicated but I don’t think we have to close all doors.”

Intrum aims to grow by buying credit management companies as well as debt portfolios from corporate clients and banks. Erik Forsberg, who took over as acting CEO when Lars Wollung was discharged in November, said a month later that Intrum wanted to do “at least two, or more, acquisitions” a year on average of small and mid-sized firms with annual revenue of as much as 250 million kronor ($30 million). Ericson said the number may be 2 to 4 a year.

“It’s a question of size and scale, but we have an active agenda to make add-on acquisitions to our existing operations and we work constantly with that perspective,” he said. “If it will be two, three or four acquisitions a year, I don’t know.”

Ericson declined to comment on media reports that Intrum is among bidders for Telia AB’s debt collector Sergel, which Dagens Industri earlier this month reported could be sold for 2.5 billion kronor or even as much as 3 billion kronor. Telia said in April it would start a strategic review of Sergel, which had net sales of about 800 million kronor last year.

Intrum’s debt purchases and acquisitions will help it achieve two key targets -- to increase earnings per share by at least 10 percent and to reach consolidated net debt relative to earnings before depreciation, amortization and impairments of somewhere between two and three.

The company is “very committed” to the EPS target and is “working incredibly hard to meet it,” Ericson said. ‘Of course I am comfortable that we can reach the company’s targets, that’s what we base our plans on.”

While growth in earnings per share at Intrum, which introduced the target in 2013, slowed in the third quarter and was negative in the fourth, it increased 18 percent in 2015 as a whole. In the first quarter, EPS jumped 30 percent.

Regarding the net debt target, Ericson said it’s “not an objective in itself” to push it above 2.0. While it’s important that Intrum has strong finances to be able to act when opportunities arise, it shouldn’t seek to reach the target by adding risk, he said.

“I would very much like to end up a bit above 2.0 but we shouldn’t do so by increasing the risk, and I also don’t think that is necessary,” he said.

Though debt portfolios have become more expensive, Intrum still increased investments in purchased debt by 57 percent to 738 million kronor in the first quarter.

“We have a very strong market out there with a lot of portfolios up for sale,” Ericson said. “We make quite a lot of assessments of these portfolios and we only invest in a fraction of the ones we see. Often there is tough price competition and we feel that they have become more expensive.”

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