ACQUISITION SERVICES

There are many reasons lenders have found Acquisitions an appealing method of growth.  Net worth requirements, meeting increased production objectives or quick growth are just a few of the more popular ones.

Expanding your footprint via organic growth can be a time consuming and frustrating proposition. Even in a familiar market, simply starting one branch from scratch can involve 6-9 months or more of down time.  Getting your firm's name out in the marketplace, interviewing and establishing a pipeline takes additional time and resources.  Many companies opt for an easier and more economical method of expansion by seeking an Acquisition.

Acquisitions come in many forms, and generally are based on one of the following structures:

Talent Acquisiton

Asset Based Acquisition

Corporate Acquisition 

The size of an acquisition can be as small as a single broker branch or as large as a multi billion, multi state organization with a sizeable servicing portfolio. The dynamics of the acquisition largely depend on the expansion objectives of the buying firm and the amount of capacity it can comfortably absorb.

TALENT ACQUISITONS:

Talent Acquisitions are based on hiring a multiple of employees (with the focus on production) and generally do not include  servicing, lease assumptions or any sort of negotiation with the company the employees are coming from.  Whether your firm is interested in securing a single branch or multiple locations, MSA will develop a criteria list based on your objectives.  We will also ask you to complete a "Company Profile" in order to determine the unique value proposition of your firm, in order to discuss the merits of joining your organization with perspective candidates.  If you are seeking expansion into a new market, it is highly recommended that your company obtain state licensing (unless exempt)  before recruiting efforts begin.  At a minimum, get the process started at the onset of the search so that the hiring process is a smooth transition and not held up by waiting for licensing to be completed.

ASSET BASED  / CORPORATE ACQUISITIONS:

Asset based transactions are based on a corporate assumption, but do not involve paying the selling firm a multiple of earnings or other good will premiums.  The acquisition is predicated on (generally) a discounted lease assumption, FF&E (furniture fixtures and equipment, usually on a discounted or depreciated value basis) a pipeline buy out and the assumption of key personnel.  In some cases, an earn out on production may be negotiated between the two Parties for a predetermined time variable, generally 12 months.  The assumption of the Seller's liabilities is also included.

Corporate acquisitions usually involve larger transactions (but not always) and often involves a payment to the selling firm based on a multiple of earnings or a good will premium based on the merits of the company as well as the size. 

Once MSA has determined the objectives of an acquisition sought, we will conduct a search to identify those firms that meet your requirements.  Once you have determined the company or companies you want to pursue, a mutual Confidentiality Agreement or Non Disclosure is executed, followed by a series of conference calls between the two Parties and an on site visit to the facility.

MSA will obtain the financial records, production reports, P&L's, staffing rosters, org charts and other documents you will need in order to evaluate the opportunity.

The Client will be responsible for the necessary due diligence and should have their own legal counsel and Due Diligence Team on board to help facilitate the transaction.  In today's era of buy backs and legacy issues, this is  critical. MSA will assist on the personnel side by obtaining resumes of the key individuals to be included, as well as discussing your company with those employees. 

There is allot of "hand holding" that goes along with an acquisition of any sort.  Employees that are not directly involved with the negotiations are understandably anxious about the future and what the new firm will mean for themselves and their families.  Even if you are an old pro at acquisitions, don't dismiss the value that MSA can bring by keeping the troops on board during the process.  We have seen many deals go south when employees learn of the impending sale.  We can help minimize the "scatter effect" and ensure that your acquisition doesn't fall apart before it gets to the closing stage.

Once the initial due diligence has been completed, a LOI (Letter of Intent) should be drafted to the Seller, outlining the general terms of the transaction proposed.  We have several sample LOI's on file which we will share upon request.  The objective is to outline the proposed structure of the deal, including any key or "deal" points.  The LOI should include a response timeframe for the Seller to accept, reject or counter the proposal.

Management: It is generally advisable to retain the senior or key management in an acquisition, at least for a period of time.  This often times results in a smoother transition and allows for better communication between management and the production teams.  Some clients opt to make this a Deal Point.

FEES: 

MSA conducts Acquisition Services on a retained basis.  The total Acquisition Fee will be based on the size and scope of the transaction sought and will include the following structure:

Closing Fee: A Closing Fee is due at the time the first employees are hired, or a LOI drafted.

Acquisition Fee: There are two options with regard to the balance of the Acquisition Fee. The fee will be predicated on the size of the transaction and the Client may choose one of the following options: 

Option #1:  Flat Fee: The Fee is based on a predetermined amount and paid at the time of closing.  Many of our clients choose this option because it generally is a lesser amount overall vs. Option #2 and there are no variables or monthly reporting involved. 

Option #2: Earn Out:  This option is based on the performance of the acquisition over time. A smaller portion of the Acquisition Fee is due at the time of closing, with the bulk based on a "target amount" which may not be reached, or may be exceeded. The total fee is  payable in increments over an 18 month period and based on closed loan volume beginning with the 2nd month following closing of the transaction.  Monthly production reports must be forwarded to MSA by the 5th of every month representing the previous month's production.

In both options, the amount of the Retainer is credited back against the Acquisition Fee on a monthly pro rated basis.  Your MSA representative will discuss Acquisition Fees with you based on the type of transaction you are seeking.