Swoop for debt firm heralds pay day for founder

A DEBT collection agency founded in a living room in Wimbledon was sold yesterday to a JC Flowers-backed business for £295m, netting its founder about £25m.
Marlin Financial, which was founded 12 years ago by entrepreneur Martin Dunphy, was sold to JC-backed Cabot Credit Management after a deal was struck over the weekend.
The acquisition marks the first major move by Cabot since it was snapped up by JC from rival private equity group AnaCap last May. JC – founded by J Christopher Flowers (pictured) – subsequently sold 50 per cent of the firm to Encore Capital Group.
The deal will see Cabot buy Dunphy’s 20 per cent stake, a 58 per cent controlling stake owned by private equity rival Duke Street Capital and a further 22 per cent stake owned by management and staff.
Irishman Dunphy, who said he is now eyeing opportunities in Eastern Europe, set up Marlin from the remnants of US firm Credit Acceptance, having sold its British operations to Dunphy in 2002 after it pulled out of the UK market.
“One of the nice things about the business is that we built it around a differentiated model so it’s hard to replicate,” Dunphy said.
The deal is set to boost Cabot’s backbook of credit as well as turning over Marlin’s litigation expertise to the business.
“We were looking at the company back in October. It was a competitive process but it went quite smoothly,” Cabot chief financial officer Chris Ross-Roberts said.
For Marlin’s private equity backers, the deal marks a substantial return.
Duke Street, which bought a Marlin stake for £12.5m in April 2010 will make three times its initial investment, it said.
ADVISERS MARLIN
LAWRENCE GUTHRIE
CANACCORD GENUITY
Last year Canaccord Genuity was advising Cabot on its sale to private equity firm JC Flowers. Yesterday it was hunter turned game keeper as Canaccord advised Marlin on its acquisition by Cabot. Leading the deal team for Canaccord was Lawrence Guthrie, a 30-year veteran of financial services advisory. Guthrie, who studied natural sciences at the University of Cambridge, was previously managing director at Hawkpoint Partners and came to Canaccord as part of its acquisition. Guthrie has advised on initial public offerings for Davenham, H&T, Nelson Hurst and Secure Trust Bank. He also worked on the private capital raising for Aldermore Bank. In the late 1990s he was involved in the £2bn securitisations of the Housing Corporation loan book and student loan portfolios. He was supported on the deal by Christian Kent, Milan Solanki and Paul Tracey.
Yesterday’s deal marks another notch for debt purchase credentials. It previously advised Cabot Financial on the management buyout by Barclays private equity and Vision Capital, as well as advising Hermes Private Equity on the proposed acquisition of Wescot Credit Services as well as acting as adviser to CapQuest on the sale of a majority stake to TowerBrook.