When Toronto-based Davis Henderson Corp. agreed to acquire online lending specialist Mortgagebot from Spectrum Equity Investors for a cash price of $231.8 million, the deal drew applause at a time when many mortgage technology deals have amounted to distress sales.
Spectrum, which has owned and partnered with Mortgagebot over the past five-plus years, said in the announcement that the sale price gave it “an appropriate return” on its investment.
Both companies said Mortgagebot, Mequon, Wis., will operate as a separate division, that the purchase will have “little or no impact” on the products and services Mortgagebot currently delivers, and that all the company’s existing relationships, contracts and agreements will remain unchanged. The Mortgagebot executive team will remain the same, with Scott Happ as president and CEO.
Tower Group senior analyst Craig Focardi told NMN he talks to both firms on an annual basis. “I think acquiring Mortgagebot gives Davis Henderson a strong product and a very deep customer base into which they can sell their other loan origination technology products that already dominate the Canadian lending market,” said Focardi. He said the deal gives Mortgagebot “deeper capital to expand their lending technology.”
Davis Henderson operates in other consumer lending arenas such as credit cards.
The acquisition makes sense for Davis Henderson, he said, because Mortgagebot, with close to 1,000 customer banks and credit union users of its Powersite technology, already is pursuing long-range expansion of its customer base. For acquirers, purchases like this one are attractive because “de novo expansion can be very expensive,” observed Focardi.
Mortgagebot boasts greater than 80% market share in its target market of financial institutions with greater than $100 million in assets that want a transaction-capable retail mortgage website. That market share now amounts to 991 of an estimated 1,200 institutions possessing or seeking such a transaction-capable Web presence, said Happ.
Since Mortgagebot’s 1997 founding, the online share of mortgage originations has grown from 1% to some 20%, Happ told NMN.
He said Mortgagebot Powersites are supported by “without question the most sophisticated retail product and pricing engine in existence. From the perspective of presentation to the consumers, we handle all of the factors that conceivably affect the pricing and eligibility of the loan.
“Every year we have a steady array of new functionality,” he continued. “We have more people dedicated to developing new technology than ever before. We are signing 12, 13, 14 new customers every month. No one else is signing that many.” He said that once Mortgagebot reaches its 1,000-customer goal, the company will set its sights on the next 1,000, with its new owner opening fresh markets to tackle.
There are still plenty of challenges to meet in the U.S. market, said Happ. “The online shopping experience is still in its early phases. CRM capability is going to become increasingly important to the end users. We hope to support integration with the leading CRM companies.”
Perennially included in Mortgage Technology magazine’s Top 50 Service Provider list, Mortgagebot has received more MT awards than any other company.
