Snapshot for week beginning 14 February. It was another busy week for dealmakers, with 47 global deals cornered by the usual suspects: Asia-Pacific (23), North America (14), and Europe (10).
Industry observers see the pandemic as creating a favourable climate for mergers and acquisitions (M&A). Covid-19 could pave the way for an uptick, whether to grow market share, create same-category economies of scale and efficiencies, or to find a bargain that could pay off long term.
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This week’s biggest deal involves the mortgage business.
With margins continuing to shrink, and lenders scrambling to maintain market share, the sector may be poised for a period of consolidation.
Stronger companies that have the financial resources typically welcome this environment and can afford to make strategic M&A decisions that will strengthen the firm for the longer term.
That’s the gambit used by a Phoenix, Arizona-headquartered bank in acquiring AmeriHome, a leading national B2B mortgage acquirer & servicer.
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By GlobalDataDeal of the week: Western Alliance Bank pays $1bn cash for mortgage co.
Phoenix-based Western Alliance Bank has signed a definitive agreement to acquire AmeriHome Mortgage Company for $1bn in cash.
Western Alliance Bancorporation specifically agreed to acquire Aris Mortgage Holding Company, the parent company of Thousand Oaks, California-based AmeriHome.
AmeriHome is the third largest correspondent mortgage acquirer in the country. It works with its network of 700 mortgage originating clients such as mortgage bankers, community and regional banks and credit unions.
The company, which also services mortgages, purchased approximately $65bn worth of mortgages in 2020.
Under the terms of the agreement, AmeriHome will become a subsidiary of Western Alliance Bank. Western Alliance will pay cash consideration of $275m plus adjusted tangible book value at closing for an estimated aggregate consideration of $1.0bn.
Western Alliance expects to achieve annual after-tax funding cost synergies of approximately $50m with total estimated after-tax merger and integration costs of approximately $27m.
The purchase price represents approximately 1.4x adjusted tangible book value based on December 31, 2020 financials and is estimated to create modest dilution to Western Alliance’s tangible book value per share that we expect to earn back in less than one year.
Evercore and Guggenheim Securities are acting as financial advisors to Western Alliance. Troutman Pepper Hamilton Sanders is acting as legal advisor to Western Alliance.
Houlihan Lokey Capital, Inc. and Wells Fargo Securities acting as financial advisors to AmeriHome on the transaction. Sidley Austin acting as legal advisor to AmeriHome on the transaction.
Deal Rationale:
The acquisition allows Western Alliance to extend its national commercial bank strategy with correspondent mortgage platform that enhances growth, returns and diversification.
The road map to mortgage business M&As
When mortgage companies choose the M&A route, they are looking for acquirers that have a larger balance sheet or deep-pocketed shareholders, a compatible sales culture, upgraded technology offerings, and an entrepreneurial mindset.
Ideally, the deal would result in a new combination where both sides win.
Firms that are looking to acquire other companies in the current environment should engage investment bankers that know their story.
These experts are familiar with their culture and are willing to take the time to proactively uncover opportunities where the potential candidate even figured yet that it is a seller.
Acquirers should look at all opportunities, including where investment bankers are conducting competitive, “limited” auctions.
They should prefer opportunities that give them more time to get to know their future partners and that are not as widely marketed to the mortgage banking community.
