Why?
http://www.insidearm.com/go/arm-news/-nco-group-backs-out-of-deal-to-acquire-legal-collector-axiantAccounts receivable management and business process outsourcing giant NCO Group announced late Tuesday that they have terminated a proposal to acquire Axiant, LLC, a leading provider of legal collection services.
In late November, NCO agreed to acquire the Huntersville, N.C.-based Axiant ... To facilitate the deal, Axiant filed for Chapter 11 bankruptcy protection.
Axiant was formed in 2007 through the consolidation of the non-legal operations of three large debt collection law firms in the United States – Mann Bracken, Eskanos & Adler, and Wolpoff & Abramson. ...
...“We were interested in the legal network aspect of the deal...,” said Brian Callahan [of NCO]. “But we’re not going to proceed with the deal.”
Read the quote carefully:
While it may seem as if Axiant were the debt collection law firm operations, they weren't. Axiant was--and is--your basic, non-legal debt collection boiler room operation. The law firm division--ultimately known as
Mann-Bracken, LLP, is an affiliate of Axiant:
Axiant's business and mission:
http://www.axiant.com/about/main.aspxWho we are.
Axiant is a leading national provider of financial services and recovery management solutions for issuers and investors in debt products.
Our mission.
We deliver our clients better financial outcomes on non-performing assets…while earning attractive returns for our investors...
Higher net recoveries and ease of doing business…enabled by “onlyAXIANT” operating scale, technology, process excellence and analytics.
Our business model.
A unique structure that combines a core financial services, business process outsourcing enterprise and a strategic relationship with Mann Bracken, LLP in combination to serve our common clients.
Our client partners.
Market leading issuers of - and investors in - debt products and portfolios.
"Strategic relationship"? Read "formal structural affiliation" or "embedded firm", in this case M-B's law firm conglomerate's being retained on a permanent basis to handle accounts which get "outsourced" to "Legal".
The main business of Axiant is to buy debt portfolios and collect on them, not running the law firm. That's why NCO could easily bid for the "embedded" law office collection arm alone.
Of course, this also raises questions as to the true ability of Mann-Bracken, et.al. to truly use proper legal judgment in handling the accounts they ended up with since their "overlords"--Axiant--would want to see "results" (judgments and money) no matter what.
Although we don't know yet why NCO backed out of the deal (the Chapter 11 BK filing was intended to facilitate the transfer of the assets), one might be forgiven if they thought this:
1.)
NCO saw the non-legal assets of Axiant as one big liability mess. This is not far-fetched; Axiant has been sued for violations of consumer law out the wazoo and there are tons of cases in court now.
2.)
NCO wanted to acquire their own "embedded' lawyers and law firms to make it easier to collect all over the U.S.. Axiant's legal operations were set up with that kind of coverage in mind; Mann-Bracken had the name recognition (and therefore the Axiant tie could be easily obliterated).
3.)
The Chapter 11 filing would have allowed the "split" to be easily done--and the liabilities lost in the shuffle.
So why did NCO back out?
Could it be that Mann-Bracken, et. al., had just as many unacceptable liabilities tied to their own name as did Axiant? That is all too possible, given their former association and use of the NAF (National Arbitration Forum) to collect before and during their time with Axiant.
Liabilities that the "due diligence" uncovered?
That would be enough to make NCO's officers--and their legal counsel and accountants--get cold feet. The last thing NCO needs is a way to get even more attention from the FTC (they are in "triple-secret probation"--under an FTC "cease and desist" order--now).
