Let's start here in Germany: Deutsche Leasing AG (DL) – the undisputed market leader in the manufacturer-independent leasing business – wants to further expand its market position in factoring. The strategy is called acquisition – namely of the Bremen-based Deutsche Factoring Bank. This was announced by the company in a press release.
(Some) market participants
Just three years ago, in June 2012, Deutsche Leasing AG swallowed WestLB's factoring business, Universal Factoring (UFG). An obvious business, after all, just like DL, UFG was aimed primarily at savings bank customers. In addition, leasing customers are also potential factoring customers – a promising synergy that seems to have paid off and even allows for further growth opportunities.
Subject to the approval of the Bundesbank, Bafin and antitrust authorities, Deutsche Factoring Bank and UFG are now to merge into a single company. This remains – as does Deutsche Leasing AG itself – a part of the Sparkasse Group. It is open whether the still independent savings bank subsidiaries SudFactoring and S-Factoring should also be incorporated. In any case, with further bundling, market power will become even greater – a fighting chance for competitors such as PB Factoring.
PB Factoring also brings a banking background: Founded as a DHL subsidiary, Postbank Factoring was transferred to Deutsche Bank in 2010. With 37 billion euros in factoring sales in 2014 (source: annual financial statements / Bundesanzeiger), it is the second strongest force in the market. Good omens, if it weren't for Deutsche Bank's announcement that it would divest Postbank Group again by the end of 2016.
Remains industry leader GE Capital Bank Inc. With factoring sales of around 47 billion euros, one might expect the subsidiary of multinational GE to be firmly in the saddle, especially since, according to its annual report, it is also forecasting growth for 2015. But GE is also moving: the U.S. factoring subsidiary has already been sold. Just like their competitor Hawk Finance: sold to Factoring Plus in June 2015. And more rumors about sales and mergers persist. So the market is also on the move internationally.
The Factoring Market: The Signs Point to Growth. Graphic: German Factoring Association e.V.
Rising sales, but not always profitable
This supply and purchase does not happen without reason. Growth rates in the factoring market continue to be positive. However, with the large number of providers, the business cannot be profitable for all of them, even more so since some major banks expanded into the German market, thus increasing competition. In addition, mini-interest rates are driving down margins for providers. And: the German Federal Financial Supervisory Authority (BaFin) has been increasingly regulating the industry since 2009 – as factoring offers have had to be approved in writing in advance by the office since the introduction of the licensing requirement.
"The factoring industry is currently in exciting times," confirms us Dr. Alexander Moseschus of the German Factoring Association. "Quite a few M&A processes are currently stirring the industry and the press; BaFin approval numbers are dropping, at the same time foreign companies are discovering the German factoring market."
So what does this mean for factoring buyers – for those companies that want to sell their receivables? Naturally, a certain level of consistency and security is important to them in their highly sensitive financing transactions. Of course, changes of ownership always bring risks. After all, the company policy, individual products and/or simply the hitherto accustomed processes may change.
Consequences for Factoring Borrowers?
Our clients are also increasingly alarmed by impending ownership changes and rumors of sales by their financial services providers. This makes it all the more positive when there is a company like z.B. Factoring Plus – a company managed by the majority shareholder – takes a very clear stand and nips any unrest among customers right in the bud: "The integration of Hawk's factoring business offers us and our customers the advantage of a company policy that continues to be very stable," founder and board member Thomas Rohe tells us. "Hawk has done well over the past few years – and we will strategically align everything to continue that way for both Hawk and Factoring Plus customers."
Basically, we don't expect anything to change in the corporate policies of factoring providers for the time being, even with changes in ownership. And: We keep an eye on the factoring partners for you and our customers, so that we can act in time in case of structural changes – for example, to regain the security that factoring needs through a tendering process. We are happy to assist you in selecting the right factoring partner and communicating with them.