How do I check whether a collection agency’s clients will stay after a sale?

A collection agency has no storefront and few walk-in customers. It has creditors who choose to send it accounts, and they can send them somewhere else. Most of the business can sit with a handful of clients, and some relationships may rest on one person. Before you buy, you want to know who the clients are, how they feel about the agency and what would make them leave.

Read the placements, not just the revenue

Ask for placement volume by client over several years, along with recoveries on each. A client sending less each year is telling you something. So is one that sends only its hardest accounts. Ask which clients came through a tender or a formal review and which came by relationship. Compare the largest client with the rest, and ask what the agency would lose if it left.

Read the contracts

Have your lawyer read each main contract for what happens on a sale, whether consent is needed to assign it, how it can be ended and on how much notice. Ask whether a client can pull open accounts back. Some contracts are informal or have lapsed into an unwritten arrangement, which is worth knowing early.

Plan the handover

Ask who talks to each client and how often. If the owner is the relationship, ask for a transition period and a plan for introducing you. Many sellers will agree to a joint call with the larger clients once a deal is agreed in principle. Ask the seller to tell you before anyone else does, and agree on what clients are told.