Intrum Justitia AB’s new CEO says there is no reason why Europe’s biggest debt collector should not 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, does not want to "set any limits,” he says.
"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 - reportedly amid differing views on the company’s future course - said late last year 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 $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. Telia said in April it would start a strategic review of Sergel, which had net sales of approximately $100 million last year.
Intrum’s debt purchases and acquisitions will help it achieve two key targets - to increase earnings per share by at least 10% 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% in 2015 as a whole. In the first quarter, EPS jumped 30%.
Though debt portfolios have become more expensive, Intrum still increased investments in purchased debt by 57% to approximately $90 million 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."