Advent agrees German all-equity deal

Advent hopes to capitalise on the highly fragmented German debt collection market with the purchase of GFKL Financial Services.

Advent International has bought German debt collection company GFKL Financial Services from a consortium of institutional investors for an undisclosed amount.

As is increasingly commonplace in private equity transactions, the acquisition was made with unleveraged equity. So-called all-equity deals are becoming increasingly frequent among private equity firms of all sizes as lending conditions remain difficult.

The acquisition, which is being made from Advent’s €6.6 billion 2008 European fund, is subject to closing conditions and merger approval.

Advent said the deal was attractive given strong growth expectations driven by increased outsourcing and a highly fragmented market. With 700 small- to medium-sized debt collection companies in the German market and the top three companies accounting for 30 percent of the market share, there are “attractive consolidation opportunities”, the firm said.

Based in Essen, GFKL specialises in debt collection and debt acquisition throughout Germany. Its receivables – which currently total more than €23 billion – range from secured real estate debt to unsecured consumer debt. As part of the acquisition, Advent will also participate in a capital increase for the business.

European debt collection has historically proved a tempting sector for private equity firms. European mid-market firm Bridgepoint acquired a UK-based debt purchase and collection business in 2004, while other pan-European firms, such as Palamon Capital Partners and IK Investment Partners, have also been active in the sector. In 2006, Advent bought a similar business – ULTIMO Group – in Poland.