Acquisition Resources

Personal insolvency specialist Debtmatters may have effectively put itself up for sale, after announcing a suspension of all direct advertising and a strategic review of the company, looking at options for its suffering IVA division and other parts of the group. 

The company made a statement to shareholders in their pre-close period update, citing changes in the criteria to be met by insolvency practitioners on proposing IVAs to over-indebted customers as the source of their difficulties. "The continued uncertainty surrounding the IVA markets has been well documented. IVA case acquisition costs have risen sharply in the face of rising competition, and IVA conversion rates have worsened due to hardening creditor attitudes which have impacted on margins. 

During the period, discussions hosted by the British Bankers Association and the Insolvency Service have continued. However, the process did not provide any firm conclusions on the issue of fees charged by insolvency practitioners and this has led to well publicised concerns over the future of the industry. These concerns have precipitated the continued share price weakness in the sector from which Debtmatters has not been immune. 

During September we started to see certain creditors seeking to modify IVA proposals such that on Debtmatters' cases, average nominee and supervisory fees would be reduced. The impact of these additional changes on the IVA business could be significant. Should these fee modifications become the norm then we may no longer be able to deliver IVAs profitably. Consequently, for the moment the Board has decided to suspend all direct advertising on TV, radio and through the press. In addition, the IVA division, which has built a significant infrastructure over the last two years since flotation, will be scaled back, with staff being redeployed into other areas of the business as appropriate. 

Although we are encouraged by the performance of Loanmakers and the early performance of the debt management division, the IVA sector remains difficult. The ultimate outcome for the year remains dependent on the ongoing developments within the IVA sector which at the time remain uncertain. 

The business has approximately 9,000 live IVA cases to process over the coming years and this will provide a platform from which we can undertake any restructuring of the Group. 

In light of the potential impact of these fee modifications on our core IVA business and given the continued disappointing share price, the Board has determined to undertake a full strategic review of the business and in this regard has appointed Charles Stanley Securities to act as its financial adviser. 

This strategic review will consider a full range of options both in relation to the IVA business itself and the wider Group. This review may or may not lead to the Company seeking an offer for the Company. However, there can be no certainty that this process will lead to an offer being made for the Company or as to the terms of any such offer. 

It is anticipated that we will update shareholders further at the time of the company's interim results. "