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14
COMPETITION AND CONSOLIDATION
The European CMS market is highly fragmented, with an estimated
25,000 suppliers. Most are small collection companies
with national operations or local enforcement agencies. The
market also includes a number of companies whose core business
is other than receivables management, such as legal
fi rms, banks and accounting fi rms. Accordingly, many of our
competitors do not regard themselves primarily as CMS or
collection companies. Of the competitors that focus on CMS,
there are only a few whose operations encompass a number
of European countries and none with a geographic coverage
comparable to that of Intrum Justitia.
Many small collection companies
In Consumer Collection a large number of competitors operate
at a national level. Several have core businesses unrelated to
CMS. These include fi nancial institutions, banks and companies
with sales to a large number of customers. In some countries
we compete with collection agencies formed and owned
collectively by transaction-intensive industries. In Commercial
Collection, our major competitors are usually credit insurance
companies with national operations or local legal fi rms.
For more information on Intrum Justitia’s market position and
competitors in each country, see pages 19–21.
Larger companies in Purchased Debt
In the Purchased Debt service line the competition consists of
fewer but slightly larger companies. Most are active at a national
or regional level, buying debts locally on a small scale. Like
Intrum Justitia, a small number of purchasers acquire receivables
in more than one country. Among them are several international
banks, pension funds and other investment companies as
well as fi nancial service companies.
Many of our competitors focus on large portfolios with relatively
large average amounts per receivable, usually with underlying
security. We focus primarily on unsecured, small and
medium-sized portfolios with relatively small average amounts.
When acquiring large portfolios, we cooperate with fi nancial
partners through joint ventures. To date two such cooperations
have been established, with Calyon Corporate & Investment
Bank and Goldman Sachs.
Active part in the industry’s consolidation
In recent years a consolidation has been under way in the CMS
industry, and our aim is to play an active, authoritative part in
this trend. Of course, the acquisition price must be reasonable
in relation to the quality of the business being acquired. In our
analysis of potential targets the price is weighed against such
key factors as market share, client structure, database quality
and the potential for synergies.
A number of driving forces point to continuing market
consolidation:
• The potential for economies of scale is rising thanks to the
continued increase in the number of companies with large
invoice volumes and small amounts per case, notably as
a result of deregulation in transaction-intensive industries.
• In pace with growing European integration, there is a greater
need for businesses to manage receivables between
countries. This in turn leads to a greater demand for multinational
services.
• The development of new, sophisticated IT and telecom services
increases opportunities to utilize economies of scale.
• Large CMS companies have a greater capacity to utilize
information databases to develop and use scoring models
in credit management, which makes these methods more
effective.
Thäis Fernández, receptionist, and David Quintana,
collection agent at Intrum Justitia Spain.