Negotiation is an inexact science, a lesson Victor Ciardelli, founder of the guaranteed rate, learned the hard way in 2017.
When mortgage manager PHH Corp. wanted to exit the lending business, Guaranteed Rate bought out its share of a joint venture with Realogy Holdings Corp. The result was Guaranteed Rate Affinity, a new joint venture with Realogy.
“At the time we negotiated the deal, they had around 440 loan officers,” Ciardelli recalls. “By the time we went through the transition using their loan originators, there were only 320 loan officers left. We were losing about 20 loan officers a month. We took over a business that was a sinking ship.
It took time and intense conversation to get things on track, but the effort eventually paid off for the Guaranteed Rate, which has nearly 5,000 employees and funded nearly $ 24 billion in loans. in 2018.
“Identify where the problems are and if they come back over and over again, you continue to fix the problem,” Ciardelli explains. “You solve the problem, solve the problem, and solve the problem. Finally, the noise goes to zero.
We caught up with Ciardelli to talk about the steps he takes to avoid difficult acquisitions and the important role culture plays in determining the success of a transaction.
Find the right people
The Guaranteed Rate was founded in 2000 and Ciardelli attributes the success of the company for almost 20 years in business to a number of things, including making deals.
“This has been an important part of the growth of the company,” Ciardelli says. “We took advantage of the opportunities as they presented themselves. We made a number of M&A-type ideals before the stock market crash [of 2008] and then when the crash happened, we knew the formula and we took advantage of it. It was perhaps more than 20 acquisitions in the space of two years.
These companies and the leadership that accompanies them across the country have been key strongholds for the guaranteed rate.
“It’s about having the right people,” Ciardelli says. “When you are able to acquire the right people who culturally match your team and the way you think and operate, that’s it. Then you can build around these people and continue to grow your business.
Ciardelli did not address its post-crash merger and acquisition activity with the aim of completing a specific number of deals.
“Honestly, we were just keeping our foot on the gas and growing the business,” he says. “We have a great platform and we thought it would work well for other independent mortgage companies that lacked the strength of the platform with technology, marketing, pricing and products and our workflow technology. “
Identify the target’s intentions
Culture is essential when looking to make an acquisition. You need to know the intentions of the management team of the business you are looking to acquire.
“Do they want to stay and continue to lead their team? Ciardelli said. “Will they follow you?” Will they integrate with your platform? Or do they want to go out and out? These things really matter, especially at the top.
Sometimes deeper issues are involved, as was the case with the PHH home loan deal, Ciardelli says.
“I put in new leadership and put our own people in that cultural harmony with us and the vibe of our organization, and then I really worked to evolve the cultural vision,” Ciardelli said. “The # 1 thing is not to panic. People are so often overwhelmed. They don’t know how to do it. They do not solve the problem. They don’t deal with the problems. No one wants to be honest about issues because a lot of people just don’t like to talk about it. So all of a sudden the cultural divide becomes even bigger. “
Assess your own needs
Acquisitions can bring great value, but they can also be a lot of work, Ciardelli says. You don’t always have to make a big splash to achieve your organizational goals.
“It’s usually easier to take a business that is a smaller acquisition and integrate it,” Ciardelli explains. “When you have larger acquisitions, they tend not to fold as much because they have established their own culture. So sometimes mergers and acquisitions are really difficult. I’m more interested in small transactions and the simple fact of being able to find smaller players to integrate than I am in the large companies that currently exist. “
Be sure to assess the depth of experience in the business you are pursuing.
“Look at the people who are part of the organization and how deep their bench is,” Ciardelli says. “How qualified are the leadership and other employees on the team? You know you have a good acquisition if you have a solid background with the business you are acquiring. You can create a lot of value there. For companies that are really heavy from a leadership standpoint and don’t have that deep bench, this can be really tough. “