M&A: Run your business like it’s for sale, so it never has to be 

Managing M&A Integration for mortgage companies is like being a wedding planner for arranged marriages. Not everyone is happy to be at this party, but I’ll be damned if they aren’t 1. impressed with the aesthetic and 2. dancing and laughing by the end of the night.

Mergers and acquisitions amongst non-bank lenders have been on the rise for several years, with about a 20% growth from 2018 (remember, rates spiked into the 5’s for the first time in years that year and margin compression started to put the squeeze on IMBs) to 2022 (this is recent enough where everyone painfully remembers the market downturn, right?), and another 30% increase from 2022 to present.* Keep in mind, we’re not talking about hundreds of transactions per year, but with another year of economic uncertainty looming, it’s an idea on the minds of more and more IMB owners. 

Now and again, an owner will come to me asking what their company is worth. They know that when it comes to value, they understand there’s more to the story than the numbers on the balance sheet. My first question is, “Are you running your business like an asset or liability?” 

Owners who operate their business like it’s an asset have made the tough decisions over these last several years to strategically: 

● Right-size operations and corporate staff 

● Address and adjust compensation to current market conditions 

● Leverage automation 

● Eliminate duplicative tech. 

● Renegotiate vendor contracts 

● Eliminate executive bloat 

● Invest in marketing and recruiting 

Owners who operate their business like it’s a liability have perhaps made some of the same decisions but from the perspective of “How do I keep afloat another month?” rather than “How do I come out of this stronger in 5 years?” Their outcomes will be different. 

Playing scary shows. Owners of these companies are often made up of underperforming sales teams that are loose in their seats. They have little reason left to believe things will improve at your organization or that you are transitioning them to the best company on the way out. Post-close, their performance erodes further, attrition takes off like a rocket, and your earnout on the backend plummets. 

Worse yet are the owners who’ve checked out completely. Those who don’t know what’s happening, and when their CFO suggests selling, throw their hands up and ask, “How much can I sell for?”

When your company isn’t a thing of value, you’ll end up walking away with nothing, hoping to find a soft landing for your people and break even on your obligations. Declining volume, eroded margins, bloated technology costs, and layered management that isn’t tied to revenue are costs no owner can afford today. These are the sellers that go to market and have no buyers. What happens if you can’t break even on your obligations and your credit tanks? Now you’ll have a hell of a time starting over. 

Now’s the time to make decisions that create an environment of success and high performance. It’s never too late to shift the trajectory of your business and position yourself for long-term success. Bring a coach, advisor, or transformational leader to rebuild your team’s confidence and develop a winning strategy for the future. Leverage competitive benchmarking to know how you stack up in margin, volume, product mix, and cost to originate. Use this data to make adjustments and improve your position. 

Run your business like it’s for sale, so it never has to be. 

*https://www.nationalmortgagenews.com/list/m-a-activity-in-2022-and-2023-a-list?utm_source=c hatgpt.com

Julia Brown is an M&A an integrations expert.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: zeb@hwmedia.com.