Proposed Acquisition of InVesting B.V.

FOR IMMEDIATE RELEASE

 1st April 2016

Arrow Global Group PLC

Proposed Acquisition of InVesting B.V.

Summary

Arrow Global Group PLC ('Arrow' or the 'Group'), one of Europe's leading purchasers and managers of debt, today announces that it has agreed terms for the acquisition of InVesting B.V. ('InVesting'), a leading consumer debt purchaser and collections provider with operations in the Netherlands and Belgium, for a total consideration of around £78.5m (€100m)1 (the 'Acquisition').

Highlights

· The Acquisition will create a leading player in the €12bn+2 Benelux debt purchasing market, complementing Arrow's operations in the UK and Portugal, as well as reinforcing its position as one of Europe's leading debt purchase and management businesses

· Benelux is a highly attractive, established market with regular portfolio sales by creditors offering good origination visibility. With circa 500 people operating from five offices across the Netherlands and Belgium, InVesting offers the ideal platform to accelerate Arrow's growth in the region with access to deal flow and strong vendor relationships

· InVesting is well known to Arrow, having already provided portfolio services, de-risking the acquisition significantly

· In keeping with its geographical expansion strategy, the Acquisition builds upon Arrow's existing asset base in the Netherlands and offers a low risk entry into the attractive Belgian market

· InVesting provides servicing for €3.7bn of credit assets in addition to associated services such as debt factoring. Combined with its existing operations asset management will contribute circa 25% of the Group's revenues on a pro forma basis, further diversifying the income profile of the Group

· As at 31 December 2015, InVesting's portfolio consisted of €663m of face value across 502k accounts and a 120-month Estimated Remaining Collections (ERC) of €107m

· The Acquisition consideration represents an implied EV/LTM Adjusted EBITDA of 4.1 times

· The Acquisition is expected to be EPS accretive and Return on Equity ('ROE') enhancing from 2017, and EPS neutral in 2016 while the businesses are integrated

· Arrow's data assets will be materially augmented by InVesting's proprietary data sets, including its credit bureau FOCUM

· InVesting will benefit from the placement for servicing of Arrow's on going purchases in the Benelux market

· Arrow will retain a balanced capital structure with the ratio of pro forma net debt to Combined Adjusted EBITDA of 3.9 times as at 31 December 2015. The Acquisition will be financed via existing debt facilities

Tom Drury, Chief Executive Officer of Arrow Global commented:

"Today's acquisition of InVesting creates a leading debt purchase and management business in the Benelux region, consistent with our strategic objective of being a top three player in each of the European markets in which we operate. Benelux has a highly attractive debt purchasing market worth over €12 billion and InVesting offers us the ideal platform from which to grow our business here.

"Arrow's data assets, a key source of advantage for the Group, will be significantly augmented by InVesting's proprietary data sets. With InVesting already servicing existing Arrow portfolio assets, we are confident in a good strategic and cultural fit that will reinforce our existing customer-focused approach. The acquisition also further diversifies our income streams and we now expect our capital-light asset management operations to account for around 25% of group revenues on a pro forma basis for 2016. We expect the deal to be accretive and ROE enhancing from 2017 and to be neutral in 2016 while the businesses are integrated.

"Following completion of the transaction Arrow will operate across five European markets, with circa one third of total ERC coming from its mainland Europe operations and we continue to see significant opportunities for long-term growth and returns across the business. I look forward to welcoming all of our new colleagues to the Arrow team and working together to deliver on these exciting plans."

An analyst conference call will be held at 9.30am this morning 1st April 2016. Details for the call are:

Dial-in UK: 0800 6940257

Dial-in International: +44 (0) 1452 555566

Enquiries:

Arrow Global +44 (0)161 242 5896

Tom Drury

Robert Memmott

Alex Barnett

Instinctif Partners +44 (0)20 7457 2020

Mike Davies

Giles Stewart

Forward looking statements

This announcement contains statements that constitute forward-looking statements relating to the business, financial performance and results of the Group and the industry in which the Group operates. These statements may be identified by words such as "expectation", "belief", "estimate", "plan", "target", or "forecast" and similar expressions or the negative thereof; or by forward-looking nature of discussions of strategy, plans or intentions; or by their context. All statements regarding the future are subject to inherent risks and uncertainties and various factors could cause actual future results, performance or events to differ materially from those described or implied in these statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Further, certain forward looking statements are based upon assumptions of future events which may not prove to be accurate and neither Arrow nor any other person accepts any responsibility for the accuracy of the opinions expressed in this document or the underlying assumptions. The forward-looking statements in this document speak only as at the date of this announcement and Arrow assumes no obligation to update or provide any additional information in relation to such forward-looking statements.

Arrow Global Group PLC

Proposed Acquisition of InVesting

1. Introduction

Arrow Global Group PLC (the 'Group' and together with its subsidiaries, 'Arrow Global') today announces that it has agreed terms for the acquisition of InVesting, a leading consumer debt purchaser and collections provider with operations in the Netherlands and Belgium, for a total cash consideration of around £78.5m (€100m)1 (the 'Acquisition'). Subject to works council advice and obtaining regulatory approvals from the Netherlands Authority for the Financial Markets (AFM), InVesting will be acquired from HAL Investments B.V.. The acquisition is expected to complete in Q2 2016.

InVesting's operations are focused on the Dutch and Belgian markets. In line with Arrow's existing operations, InVesting's focus is on portfolio purchase, asset management and outsourced collections provision. Founded in 1996, InVesting has grown both organically and by acquisition to become a leading player in its chosen markets. InVesting's head office is based in Hilversum, the Netherlands. 

2. Background to and reasons for the Acquisition

The Acquisition will create a leading debt purchase and management business in the Benelux, complementing Arrow's leading positions in the UK and Portugal and cementing the Group as one of Europe's leading purchasers and managers of debt. The transaction builds on Arrow's 2015 portfolio purchases in the region and is in line with the Group's stated strategy of being a top 3 player in each of its chosen markets.

Arrow has successfully adopted a measured approach to geographical expansion, building up expertise, relationships and data sets in a targeted region and using this as a base from which to expand rapidly. The Acquisition is a prime example of this approach.

In 2014, Arrow was granted a licence by the AFM to operate in the region. In H1 2014, Arrow completed its first portfolio purchase in the Netherlands and in Q4 2015 purchased further portfolios with a face value of €300m and has already been working with InVesting on the servicing of these assets.

The Acquisition announced today will generate significant opportunities for Arrow to leverage its combined experience and expertise for the benefit of all the Group's operations. Cross utilisation of data assets, knowledge transfer initiatives and the sharing of operational best practice programmes will be reviewed and implemented where appropriate following the Acquisition.

The Acquisition is fully aligned with Arrow's strategic objectives:

1. The Acquisition will build on the recent portfolio purchases in the region and establish the Group as a leading player in the Benelux region. The Acquisition will add 0.5m customer accounts with a face value of €663m (as at 31 December 2015). The portfolio is weighted primarily towards financial services and as a result will add to and improve the Group's data sets, underpinning pricing and underwriting;

2. The Acquisition is expected to be a value enhancing use of the Group's capital, combining both portfolio assets with an attractive return profile with an established collections business that is a key part of the Benelux network. The Acquisition will further diversify the income streams of the business, augmenting the risk profile. Revenues from asset management are expected to be circa 25% on a pro forma basis for 2016. InVesting offers several additional services including debt factoring, FOCUM, a business information provider, and AchterafBetalen, a leading open invoice payment provider for online post payment solutions. The Acquisition of InVesting, combined with Arrow's existing assets in the region, builds a strong position in the consumer, residential mortgage, commercial real estate and asset management markets;

3. The Acquisition will provide a robust platform to expand out into the region. InVesting's presence on lending panels will open up further investment opportunities, and Arrow's technological innovation in cost effective servicing overlaid on InVesting's processes will permit both efficiencies and the opportunity to extend the footprint;

4. As both purchaser and manager, InVesting has significant experience and data histories. Arrow has proved successful in gaining advantage through data asset leverage and management expect to realise similar benefit from InVesting's proprietary data. InVesting has 10.5m customer profiles in its FOCUM information database and circa 500,000 owned accounts. In the Dutch market, the use of national identity numbers by creditors is prohibited, making proprietary databases a key driver of competitive advantage;

5. InVesting has an excellent reputation for customer engagement and compliance and will add to Arrow's ability to provide high service levels to its customers and clients.

3. Financial effects of the Acquisition

Subject to works council advice and obtaining regulatory approvals from the AFM, Arrow will acquire InVesting for a total cash consideration of around £78.5m (€100m). The valuation is underpinned by portfolios re-underwritten using Arrow's proprietary models with additional value allocated to InVesting's servicing platform and other assets.

As at 31 December 2015, the enlarged Group would have had £21.9bn in combined receivables under management by face value (£14.7bn of which are owned), combined 120-Month Gross ERC of £1.3bn and 10.7m combined accounts under management (9.1m of which are owned).

The Acquisition is expected to increase asset management revenues to circa 25% on a pro forma basis for 2016. There has been a noticeable trend in recent years of debt panels and asset managers seeking fewer, more robust and well-resourced debt purchasers and servicers with whom to transact business. Arrow is a beneficiary of this trend.

For the 12 months ended 31 December 2015, the enlarged Group would have generated a combined Adjusted EBITDA of £171.4m. On a standalone basis (Dutch GAAP), InVesting generated profit before tax of £7.2m in the year to 31 December 2015 and had assets of £57.8m at the balance sheet date. The acquisition has an implied EV/LTM Adjusted EBITDA of 4.1 times. The Acquisition is expected to be EPS accretive and Return on Equity ('ROE') enhancing from 2017 and EPS neutral in 2016, the expected year of completion of the Acquisition.

The Board expects the effects of the transaction will involve one-off cash costs of approximately £3.5m.

4. Financing of the Acquisition 

The Acquisition will be financed by existing facilities. Arrow has secured a further £50m of committed funding to complement those existing facilities. Arrow will continue to maintain a balanced capital structure and will assess funding options in order to secure new or replacement financing, subject to market conditions.

5. Management and employees

InVesting has circa 500 employees. Joost van Rens (CEO), Edward van der Veen (CFO/COO) and Erwin de Boer (CCO) are expected to continue on in their roles in the business following completion of the Acquisition. Arrow's management look forward to working with InVesting's senior management to execute the business's existing business plan.