A consolidation play: W.J. Bradley Company Merchant Partners LLC, Denver, is in the market to buy small originators.

Author:Bergsman, Steve
 
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If the motion picture world boasts a "Terminator," then the mortgage banking industry can brag about a "Consolidator." [??] Of course, the Terminator was a character played by larger-than-life actor Arnold Schwarzenegger, who now resides in the governor's mansion in Sacramento, California. By comparison, the Consolidator is a little-known, unheralded entrepreneur by the name of William Bradley, who works out of Denver's tony Cherry Creek area. [??] If all goes as planned, Bradley, the businessman, will probably outearn Schwarzenegger, the actor, even with the latter's multimillion-dollar-per-picture deals. [??] Bradley's firm, W.J. Bradley Company Merchant Partners LLC, has been buying up mortgage banking and brokerage companies for the past three years. In 2007, W.J. Bradley expects to do three large-scale deals and five to seven "walkovers," or acquisitions of production units from companies going out of business. Bradley did three walkovers in August. [??] "There's plenty to be had," says Bradley, the company's president and chief executive officer, "but you don't want to get ahead of yourself in this business." [??] W.J. Bradley, founded in 2002 by Bradley and Joseph Cambi, now chairman, was created for one reason only: to consolidate origination in the residential mortgage sector. "We are a consolidator," Bradley says plainly and forthrightly.

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Focusing on the modest-sized residential origination firm (mortgage

volume in the $500 million to $1.5 billion range), W.J. Bradley has completed nine deals since January 2005 with seven retail originators and two wholesale mortgage banks.

Industry consolidators--whether in residential mortgages, restaurants or high-tech--try to create a larger company with considerable market presence, and then after a set period of time cash out through a liquidity event of one sort or another. The company is either sold, taken public or merged.

This is Bradley's game plan as well. The companies controlled by W.J. Bradley Company Merchant Partners will do about $3.5 billion in loans in 2007. The timeline originally set by Bradley and Cambi was seven years from the founding of the company, which would take them to 2010 or 2011. By that time, the goal is to get to $15 billion in originations.

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"If you look at the sale multiples of companies of varying sizes and product types, you find that as you cross over $8 billion to $10 billion in volume, the enterprise value of the company increases more dramatically than if you are sitting at $5 billion," says Bradley. "You cannot garner attention at $5 billion. At higher volumes, you have greater chance for a pop."

Finding a niche

The irony about Bradley's plans to consolidate in the residential origination space is that before he started consolidating, he knew very little about the industry. That might actually have been a good thing, because what Bradley does know how to do is raise investment capital--and he can sense a good opportunity when it arises.

Perhaps the most valuable personal asset as a consolidator is an aggressive, go-getter personality, which Bradley has in spades.

Right after graduating from the University of Colorado in Boulder, and before the ink was dry on his diploma, Bradley and couple of friends moved to San Diego and started raising capital from high-net-worth individuals to invest in small companies. That was in 1995.

"We started raising $500,000 to $2 million for early-stage technology companies," Bradley explains.

After five years in California, Bradley and his wife decided they wanted to come back to Colorado, and the idea was to create the same kind of enterprise in the Rocky Mountain region. "We were essentially serving 'angel investors' [high-net-worth individuals with liquid capital to invest] in Southern California. At the time, there was a strong movement in the angel-capital sector on both coasts, while the middle of the country had not picked up on it yet," says Bradley.

In 1999, Bradley created W.J. Bradley Company in Denver and immediately partnered with a Boulder, Colorado-based incubator. That morphed into CTEK Angels, Boulder, Colorado, which, says...

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