If you are in the mortgage business, there is a good chance by now that you or your company have been impacted by a merger in some capacity. And if you have not, there's a good chance you will this year. [paragraph] Acquisition activity spiked considerably in 2015, across the country and across several industries. According to Thomson Reuters, through the end of the third quarter of 2015, $3.19 trillion in deals were announced--which is just 2 percent below 2007 levels. This brought 2015 to a global total of nearly $5 trillion in deals, according to New York-based Dealogic. [paragraph] Rising bank mergers have been apparent, increasing 20 percent to 250 mergers between 2013 and 2015, according to FIG Partners, an Atlanta-based research firm specializing in community banks. While 2015 was referred to by many as a record year for mergers and acquisitions (M&A), continued high levels of merger activity are almost a certainty. Experts such as financial analyst Richard Bove, equity research analyst with Rafferty Capital Markets LLC, New York, predict 2016 will also see record mergers. What is not quite as certain is how this will impact mortgage industry vendors--especially the technology providers that support organizations undertaking a merger.
Keeping a close eye on this industrywide consolidation trend has forced many vendors to significantly adjust how they approach their own planning and budgeting. They have had to re-evaluate how they invest their time and resources, taking into account the growing likelihood that a customer, or multiple customers, will be consolidated or acquired.
With the amount of movement taking place within the mortgage industry, it is unrealistic for vendors to have a "business as usual" approach. Not knowing exactly what lies ahead, they must find ways to maintain a high standard of quality and service while being mindful of their own budget and profitability goals.
And for mortgage companies going through a merger and making several tough choices (including which technology to retain), it is more important than ever to view vendors as partners.
During an acquisition, technology should not be a burden or a challenge; rather, a technology vendor's role is to demonstrate its ability to support operations and serve as a trusted resource during the transition and well into the future. Thus, merging companies are looking more closely at what their vendor partners can offer beyond just the functionality of their technology. In October 2015, New York-based EY's 13th Global Capital Confidence Barometer reported that while real estate, hospitality and construction executives are confident in the M&A market, 60 percent will be focused on cost reduction and operational efficiency over the next 12 months. They are looking to gain both technology and expertise on which they can continually rely.
Increased merger activity, especially among mortgage lenders, is largely, and very evidently, attributed to mounting compliance costs. Even following the Federal Reserve rate-hike announcement, many feel low interest rates and challenges growing loan volume will encourage more companies to improve profitability through mergers and acquisitions. New York-based Intralinks' Deal Flow Predictor (DFP) reported that for the real estate industry specifically, there was a 57 percent increase in due-diligence activity in the first half of 2015. This report, which provides a six-month M&A projection, indicated this increase was the largest for any industry.
And the appetite for M&A in this sector will continue to be strong, according to U.S. Executives on M&A: Full Speed Ahead in 2016, an October 2015 survey of more than 550 M&A executives conducted by...