Debt purchaser Arrow Global has agreed terms to acquire Mars Capital UK and Ireland, a mortgage servicer, and secured a partnership with a global asset management firm.
As part of a trading update published today (August 31), Arrow announced the proposed acquisition of Mars Capital for an enterprise value of £15.5m. The deal provides a strategic entry into Ireland, a new market for the group that offers debt purchasing and servicing opportunities.
Arrow has also announced a strategic partnership with Oaktree Capital Management, a global asset manager with $100bn under management, that will see the two businesses acquire future UK and Irish residential mortgage portfolios together.
The agreement ensures Oaktree’s existing UK and Irish residential mortgage assets continue to be serviced on Mars Capital’s servicing platform for an agreed time.
Lee Rochford, group chief executive of Arrow Global, said: “These agreements expand our European footprint, augment our capital-light asset management capabilities, provide further impetus to our profitable growth trajectory and are completely aligned with our strategic direction.
“We are seeing marked demand for servicing solutions that meet the diverse requirements of multi-asset and multi-jurisdictional credit portfolios. Mars Capital adds depth of expertise in the secured real estate market to our servicing offering, and we see clear opportunities to offer this across our existing client base. The acquisition also opens up the Irish market, one of Europe’s largest NPL and servicing markets."
The Mars acquisition
The deal will involve Arrow, subject to regulatory approval, purchase Mars Acquisition – the holding company for a group of businesses owned by funds advised by Oaktree and the servicer’s founders, Matt Gilmour and Alex Forrester. Mars Acquisition comprises the Mars Capital UK and Irish secured servicing platforms.
There are other businesses within the Mars company which are not being acquired by Arrow. These are an Irish property management business, a Spanish servicing platform and a UK mortgage origination business. These three businesses will be separated out before completion.
Mars Capital, which is being acquired by Arrow, provides servicing for residential, buy-to-let and SME commercial mortgages, and as well as full lifecycle servicing; from loan origination support to late stage recoveries and real estate sales. The business has a particular focus on managing distressed mortgage NPLs.
The acquisition will produce servicing revenue from existing portfolios, securitisations and Magellan Homeloans, a specialist mortgage originator, while providing access to its proprietary IT platform, designed to service residential and small-ticket commercial mortgage assets.
As at July 31 2017, Mars Capital was servicing over 10,000 customer accounts and had £1.6bn of UK and Irish assets under management.
’The acquisition will be funded in cash from existing group resources’
For the year ended March 2017, Mars generated revenues of £9m and pre-tax profits of £2m. Mars Capital’s UK and Irish teams will add around 65 staff to Arrow’s team.
Arrow said the acquisition will be funded in cash from existing group resources, with £9m paid on closing and the rest paid on the fourth anniversary of completion. Transaction-related expenses are expected to be about £1.2m.
Kevin Blake, managing director of Mars Capital, said: “With the support of Mars Capital’s founders, Matt Gilmour and Alex Forrester, we have built a strong, focussed business in the UK and Ireland which will sit well in Arrow Global’s asset management capability set. We believe this provides the enlarged group with significant opportunity.”
The Oaktree partnership
Rochford said the partnership will provide significant portfolio investment and asset management opportunities in the UK and Ireland.
Chris Boehringer of Oaktree Capital Management said: “We recognise Arrow Global as one of the leaders in Europe in the secured and unsecured investment and servicing space. Their breadth of expertise and servicing scale give us a partner who can work alongside us in the UK and Ireland as we seek to take advantage of future investment opportunities.”