Selling Your Mortgage Company
Great outcomes are possible with the seasoned M&A team at MorVest leading the way.
A period of mortgage industry consolidation began in 2017 and intensified in 2018 as margins from production continued to decline. This has resulted in a spike in M&A transactions. Dovish comments from the Federal Reserve in Q1 2019 have resulted in lower long-term interest rates, coinciding perfectly with the beginning of the typically favorable Spring/Summer seasonality period. This will cause the stress on IMBs to subside somewhat, but we still expect industry conditions to remain challenging going forward and the trend towards consolidation to remain intact.
MorVest specializes in assisting clients with liquidity and capital solutions and sometimes improving cost efficiencies and generating cash from maximizing bank provided borrowing opportunities on MSRs or other working capital facilities is sufficient. In many cases however, adding capital is critical to the ability to survive and thrive. Mezzanine capital in the form of subordinated debt and preferred stock are options for larger IMBs but have a poor chance of execution in an environment of reduced margins and low net income or losses.
The best solution for some companies may be to sell an equity stake. However, the ability to sell a non-controlling interest is not available to most IMBs and in any case investors in such deals would be reluctant to pay more than book value, causing the effective cost of capital to be dear indeed. This leaves selling a controlling interest in the firm. We know this is not an easy decision, but we witnessed an increasing number of players electing to do so in 2018 which we expect will continue.
If you are pondering the sale of your mortgage company, it is important that you discuss your options with a trusted advisor possessing deep mortgage industry M&A experience. Larry Charbonneau, managing director of MorVest’s M&A group, has successfully advised on over 90 M&A transactions in his career and is assisted by a veteran team of other mortgage bankers. We understand your business model, how it works, its seasonality and how to navigate the entire process in a manner that maximizes your outcome.
What is your company worth? We can tell you.
Call us today, you’ll be glad you did!