Broker network head hints at consolidation

Broker network head hints at consolidation

Broker network head hints at consolidation More consolidation is coming, according to one network head who has already received offers of his own.

“Within the industry I think there is going to be more consolidation as time goes on,” Ron De Silva, CEO of RMAI Financial Group, told MortgageBrokerNews.ca. “Yes, I have been approached. We’ve danced and I’m not averse to looking at that; however, the organization still holds a lot of growth opportunities within.

“If I’m going to sell today, I’d require a premium to what has transpired so far.”

Consolidation is nothing new to the industry.

“We’ve got one organization that with several acquisitions have created some critical mass for themselves and some others will look to do that as well.”

That organization, of course, is Dominion Lending Centres, which purchased competitor Mortgage Architects in late 2015. DLC also made headlines in 2013 when it acquired the Mortgage Centre – another major broker network.

The latest deal is one De Silva argues sets a precedent for future consolidation within the industry.

“Gary paid $10 million for (a company that does) $8 billion (in sales). So that’s $1.25 million per billion. Given where we’re at, that brings us to just over $2 million,” De Silva said. “Our sales are $1.6 billion. Once you multiply that by 1.25 it comes to $2 million (in purchase price). That’s not a lot of money in the scheme of things once you split it with your partners and pay your taxes.”

MortgageBrokerNews.ca contacted DLC to confirm those numbers but, due to the terms of the transaction, the company could not disclose actual figures.

“The terms of the agreement state that neither party will publicly discuss the financial terms of the transaction,” Dave Teixeira, VP of marketing, public relations, and communications, told MortgageBrokerNews.ca. “We of course will be honouring that agreement.”

However, while De Silva says he isn’t ready to sell the company, it is something he would consider in the future. That or, perhaps, a merger.

“Say we’ve achieved a $5 billion sales volue and we can expect to make a $7 million said. I’d say that looks good,” De Silva said. “Or at that point in time, maybe we would consider merging to create something that would then be an entity that is $15-$20 billion.”
2 Comments
  • Jack Black 2016-03-03 9:08:55 AM
    Why in the world would the head of a national brokerage be publicly talking about selling? Talk about destroying trust in the brand.
    It seems to me that he would sell right away for the right price. Not a statement that instills confidence in the agents and brokers in that network.
    I would suggest agents and brokers of RMA consider joining another brokerage that intends to be around for years to come, not one looking to cash out.
    Post a reply
  • Ross Taylor 2016-03-03 10:16:04 AM

    I don't understand the math. DLC really only paid 0.125% of sales??

    Are the margins so low in our business?

    If they can net say 1% profit from sales, that would be $80 million dollars per year.

    If their net profit is only 0.5%, that's still $40 million per year.

    Not bad for a cost of $10 million. Where can I get some of that?

    Probably I am not understanding something here....
    Post a reply