Canada’s “New” Largest Brokerage

business acquisitionThere’s a race underway in the broker industry, a race for scale. Brokerage firms are uniting to achieve better economies in a shrinking margin environment.

And the mega-network trend is fast becoming a three-horse race, with DLC, Group Multi-Prêts Mortgage Alliance (GMP) and VERICO being the volume leaders, in that order.

Earlier this month GMP announced that it had narrowed the gap with volume front-runner DLC by purchasing 100% of Invis and its sister company Mortgage Intelligence. That purchase made Group Multi-Prêts Mortgage Alliance the largest full-service brokerage operation in Canada with 3,000 brokers and loan volume of $22 billion annually. (DLC says its run rate is $39 billion this year.)

We caught up with some of the key players in GMP’s acquisition: Luc Bernard, President and CEO of Group Multi-Prêts Mortgage Alliance; Michael Beckette, CEO of Mortgage Alliance; and Cameron Strong, CEO of Invis Mortgage Intelligence (Invis-MI).

Here are excerpts from that conversation:

On the impetus for the acquisition

  • Cameron: “…we looked at it and said, ‘…It makes a lot of sense for these full-service companies to combine and come together.’ We thought that the clear winners were going to be the brokers here…”
  • Michael: “It’s not about consolidation…Invis-MI was never for sale. It’s about opportunity…I think that’s [a distinction] that’s really, really important.”
  • Luc: “I can confirm that the organization [Invis-MI] was not up for sale. It was really through discussion and sharing the vision that we kind of reached a meeting of the minds. The rationale behind the transaction is quite simple. The [broker] ecosystem is evolving rapidly. We had another proof [with the latest mortgage rules]…In order to mitigate those [challenges] and capitalize on new opportunities, and allow essentially our brokers to capitalize on these opportunities, size does matter now.”

On the need for a strong full-service brokerage for consumers

  • Cameron: “…the changes and legislation never stop, as you know. The complexity of mortgage rules keeps growing, and it’s difficult for some people with [unique] financial situations (like self-employed borrowers)… I think that’s what makes brokers more valuable as specialists. Brokers and consumers face an ever-changing business and regulatory environment… We don’t believe (the consumer) can do this alone. We think the full-service model is effective and resonates, and we think that that is an important model going forward.”

On how GMP will compete with growing online competition (i.e. discount brokers, banks’ forays into the online channel, rate comparison sites, etc.)

  • Luc: “There are many segments, and we’re going to adapt our offering to segmentation. We’re not going to disclose our strategy… but we have the talent, we have the cash, and we have the technologies to support our brokers in reaching the consumer [online]…”

On the benefits of creating a larger brokerage

  • Luc: “Size brings you data, big data, and that gives us and the broker the ability to better understand and anticipate the need of the consumer.”
  • Michael: “Size matters as far as investment and technology services…[It] matters as far as the relationships that we can develop with lenders…One of the benefits of size that has not been available in the brokerage industry is the synergy of resources. We’ve got two profitable companies coming together to invest in systems, services, resources and products for brokers instead of doing it on an individual basis…”

On eliminating duplicate technology and excess staff

  • Michael: “I think it’s very, very important to understand that there’s two types of synergy, and the type of synergy that we’re focused on is on the revenue side, and investing twice as much in developing resources rather than looking at, ‘Okay. Slash this. Slash that.’”
  • Luc: “Each company has their best practices…so it’s now time to cross-pollinate those best practices across the organization. For instance, in mobile applications, lead generation, integrated technologies and new revenue [opportunities]. Those are the things we’re going to look at and make sure every [broker] in the group will have access to those…and to the best practices that are already in place.”

On the purchase price

  • Luc: “…it’s in line with the transactions that involved another company last June [DLC]…The price that was paid to acquire 100% of the shares [of Invis] was in line with the market. Let’s put it that way.”

On plans to better equip brokers

  • Michael: “We, as an organization, need to arm our brokers with the opportunity to be able to deliver a service the way the consumers want it delivered. So if somebody wants to go online, we have to arm our brokers so that they can be in that space. If our brokers want to get business from referrals from realtors, we want to help them do that. If our brokers want to develop their local marketplace and create a brand, we want to help them do that.”
  • Luc: “…we’re deploying a new revenue strategy based on the success Cam and his team have had throughout the years…a new…approach when it comes to distributing the insurance product.”

On future opportunities

  • Luc: “Our objective is to double the size of this organization, so now we’re roughly at $22 billion (in volume). We would love to reach the $40 billion mark in probably three, four years… but 50% of this growth would come from other acquisitions and 50% would be from organic growth.”