Scott Roller: Mortgage Vendor News & Views, December 2021

(Scott Roller founded 3W Partners LLC and is Co-Founder of Vendor Surf LLC (www.VendorSurf.com), each dedicated to revolutionizing sourcing of vendors in the mortgage and credit union ecosystems. The companies monitor and report on the service provider market to provide participants what they need to excel in today’s market. He is a regular contributor to MBA NewsLink.)

In this ongoing article series, we report on mortgage and credit union vendor marketplace events and trends, and we then share our viewpoints.  Today we delve into the bevy of activity surrounding vendor mergers and acquisitions (M&A).  “Show me the money!” – Rod Tidwell (aka, Cuba Gooding Jr. in the 1996 movie Jerry Maguire.)

How many transactions are we talking about?

Who is doing the buying – and what are they spending?

What types of vendors being bought?

At Vendor Surf, we track and post all such significant vendor M&A announcements, currently listing 254 dating back to 2007. We have analyzed transactions from the past two years, unearthing some intriguing information, including:

• The volume of deals has been remarkably the same in 2020 and 2021
• However, the buyer profiles had a major shift in 2021
• Three buyers remained very active over the 2-year period, logging 21 combined deals
• Six percent of all deals (disclosed) exceeded $1 Billion
• But, deal terms are rarely disclosed; Just 25% of the time

Year Over Year Trends –

We were not expecting to see such parity between 2020 and 2021, especially as the global pandemic has continued on.  Still yet, we logged 48 significant deals in 2020, and another 49 thus far in 2021 – as the year comes to an end.  Readers will surely want to know the total dollar volumes involved, but given that deal terms are only provided about one fourth of the time, we all must remain ‘a lost ball in tall grass’ – unable to show you most of the money.  A total of $15B was disclosed in 2020, with another $14.2B in 2021.  This still leaves us wondering about the other 75% of undisclosed deals.

The largest deals disclosed within the past 2-years are:

• $11B – ICE Mortgage Technology’s purchase of Ellie Mae (August 2020)
• $6B – Private equity (Stone Point Capital and Insight Partners) purchase of CoreLogic (June 2021)
• $3B – Supernova SPAC purchase of Offerpad (March 2021)
• $1.8B – Black Knight’s purchase of Optimal Blue (July 2020)

We also looked at the most popular types of vendors being acquired.  They are:

Vendor Type	Total Deals 2020-21
Fintech	18
Appraisal & Appraisal Tech	12
Property Data	6
Title & Title Tech	5

So, when is the best time to buy?  No particular time period trends were uncovered, as the third and fourth quarters in 2020 were most active, while first and second quarters in 2021 accounted for a slight majority of deals. 

The Main Buyers

Private equity had been relatively quiet in 2020, with just a few significant M&A deals.  However, they stole the show this year, racking up 11 transactions so far, representing 22% of all deals.  The increased popularity of special purpose acquisition companies (SPACs) appears to have a lot to do with this major shift.  We expect this ‘blank check company’ trend to continue. 

The following three industry heavyweights were busier than cats at a laser show – Stewart, SitusAMC and Black Knight.  Each of them averaged nearly one significant transaction per quarter within the past 2-years, with a collective total of 21 deals announced, or 22% of all deals we studied.

Stewart was the most active with eight transactions, buying two appraisal companies (Pro Teck and United States Appraisals), NotaryCam, nearly 60 title agent shops, Informative Research, Signature Closers, Cloudvirga and PropStream.

Black Knight announced six deals, buying Collateral Analytics, DocVerify, Optimal Blue, Top of Mind Networks, a broker LOS from NexSpring Financial and eMBS, Inc.   

(Advice: for the next segment here, load up on caffeine and/or energy drinks.  You will need some ‘brainage.’)  SitusAMC was the second-most active in the past two years, but to truly grasp their collective activity and what they have morphed into, our archaeology instincts came in useful, digging back several more years.  Always an entrepreneurial mindset, I am thinking we should launch a mortgage vendor version of the popular PBS series ‘Finding Your Roots.’  Below is the SitusAMC family tree going back to 2015.

You may recall that SitusAMC was actually born out of a June 2019 M&A transaction when Situs merged with American Mortgage Consultants, creating one of the largest advisory firms in the real estate and mortgage ecosystems.  Here, we cease ‘showing you the money,’ and instead begin to FOLLOW the complicated money trail.   

• Jan 2015 – Stone Point Capital (PE firm) buys Situs
• Dec 2015 – AMC buys JCIII & Associates (QC/due diligence)
• Jan 2017 – AMC buys Stewart’s QC/due diligence unit
• May 2017 – Situs buys The Collingwood Group (Advisory)
• Jan 2018 – Situs buys MountainView Financial (Secondary)
• Apr 2018 – Stone Point buys AMC (whom already owned Situs)
• Jul 2018 – AMC buys certain assets of The Barrent Group (QC)
• Jan 2019 – AMC buys Meridian Asset Services (Collateral, curative and title QC)
• Mar 2019 – AMC buys String Real Estate Info Services (Outsourcer)
• Jun 2019 – AMC buys MBMS, Inc. (Secondary tech)
• June 2019 – Situs and AMC merged; Though both already owned by Stone Point
• Oct 2019 – SitusAMC buys Baseline Analytics
• Jan 2020 – SitusAMC buys Alan King and Co. (Fintech)
• Sep 2020 – SitusAMC buys parent of ComplianceEase
• Sep 2020 – SitusAMC buys Servicing & Asset Mgmt. Platform from Truist
• Nov 2020 – SitusAMC buys rSquared (CRE tech)
• Jan 2021 – SitusAMC buys ReadyPrice (PPE)
• Jan 2021 – SitusAMC buys Assimilate Solutions (Outsourcer)
• Feb 2021 – SitusAMC buys Street Resource Group (Warehouse platform)
• Jun 2021 – Stone Point (and Insight Partners) buy CoreLogic

What an epic journey!  I am guessing new-hire orientation lasts at least a week, hopefully without any quizzes.

Our Take – M&A Going Forward

It is doubtful that anyone else can claim more strategic investments than Stone Point.  These 20 transactions span just the past seven years, yet Stone Point has been abnormally silent since the $6B CoreLogic deal.  They are unlikely to remain that way. 

The heavyweight acquirers listed herein will continue to pursue deals, however, the competition will be fierce as a result of the ‘blank check companies’ (SPACs).  Further, with the historically low interest rate feeding frenzy seemingly ended, and a market turning to purchase (vs. refi), more vendors will also be expressing interest in their own marketability. 

On Vendor Surf, we have logged 97 significant M&A deals (keyword searchable) within the past two years, nearly one every week.  But, given the 39-year high inflation being reported, along with other economic, political and social challenges, we predict a slight decline in the number of M&A transactions in 2022.  Private equity is expected to lead the way, regardless.

Other likely buyers to watch are (alphabetical order): Clear Capital, First American, ICE Mortgage Technology, Voxtur and Wolters Kluwer.

Thanks for reading. 

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)