M&A consultants reveal secrets to merging mortgage companies

When two mortgage companies decide to merge, the success or failure of the integration often hinges on the small details. Retaining key employees, aligning compensation structures, and fostering communication are critical components in ensuring a smooth transition after the deal has been sealed. Julia Brown, founder of Telescope, warns against the dangers of not being transparent about changes, as this can erode trust and credibility among employees.

As the mortgage industry experiences consolidation, we have seen various acquisitions take place in recent years. From Rocket Mortgage acquiring Redfin and Mr. Cooper to Guild Mortgage absorbing multiple firms, these deals are a response to the unpredictable housing market. Sellers seek to exit the origination space altogether, while buyers aim to increase their market share and volume.

Guild Mortgage and CrossCountry Mortgage are lauded for their expertise in effectively integrating new branches and organizations. Prioritizing operational stability, marketing spend, and continuity for originators are key factors in ensuring the success of these transactions. Understanding the intricacies of the acquired company and being open with employees about upcoming changes are vital components emphasized by M&A consultants.

Timing and approach to transparency are crucial in managing employee expectations during a merger. Oversharing too early can lead to staff attrition as employees may begin exploring opportunities elsewhere. Brian Hale, founder of Mortgage Advisory Partners, shared an instance where premature honesty from the acquired company’s CEO led to a wave of departures before, during, and after the deal was closed.

Successful M&A transactions require meticulous planning, with months to years needed to finalize agreements that satisfy both parties. Culture plays a significant role in the integration process, focusing on building a cohesive environment that values and respects employees. Incorporating tools and compensation packages similar to those of the acquired firm while clearly outlining changes is key to retaining staff and ensuring a successful integration.

Senior management visibility and availability post-merger announcement are crucial in setting the tone for a smooth transition. Communication and support during the onboarding process can help alleviate employee frustrations with new technologies and procedures. While some turnover post-merger is expected, exceeding certain thresholds may indicate deeper issues in the integration process.

Understanding the human element and valuing employees are paramount to the success of any merger. Deal-makers must not overlook the complexity of originating mortgages and the individual triggers that may upset employees. Acknowledging these differences and fostering a harmonious transition is essential in retaining talent and establishing a unified corporate culture post-merger.