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Spending spree regrets for DCAs

Aggressive investment strategies have meant that some debt collection agencies are struggling to survive, according to a new report by Plimsoll Publishing.

The study found that the UK’s 100 largest companies now control 96 per cent of the market, an increase from 92 per cent two years ago.

However, of those companies surveyed, 67 have failed to increase sales at the same rate as investment while 34 are not seeing any sales increase whatsoever.

David Pattison, senior analyst with Plimsoll, said that with the economic slowdown, the battle for market share is proving costly and putting unprecedented pressure on managers to keep their companies afloat.

"Following the last few years which have been largely profitable, business leaders have been keen to invest heavily, and in turn have borrowed heavily," he said.

"Yet due to the turbulent economic climate of 2008 they are seeing very little by way of return. This ambitious investment strategy has left some companies in severe financial danger, and as a result 25 companies have been awarded a danger rating in this study as result of their failing business strategy."

Pattison added these companies need to rethink their business models and that jobs will be lost and key projects could be cancelled in an attempt to control the spending.

"It’s likely that the management at some of these companies could be changed to accelerate the cutback process, as it’s a lot easier for new managers to come in with a clear remit and instigate these tough decisions. The other obvious option is that some of these businesses will be sold off," he said.

The study suggests that the value of these 100 companies has fallen by around 40 per cent in the last 12 months and says some firms are prime potential acquisition targets.

"Despite the turmoil in financial markets, there is no doubting this is an ideal opportunity for the more visionary leaders in the market to steal some ground on their competitors by buying up one of these weakened players," he said.

"It’s a great time to go on the offensive – if you have the cash reserves to do it without placing your own business in jeopardy."

This article was sourced from www.credittoday.co.uk

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