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Walker & Dunlop (WD) Set to Gain From GeoPhy Buyout: Here's How
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Walker & Dunlop, Inc. (WD - Free Report) has inked a deal to acquire GeoPhy, a commercial real estate technology company. The transaction, expected to be complete during the current quarter, is subject to approvals.
Per the terms of the transaction, Walker & Dunlop will pay $85 million in cash at the closing in addition to $205 million of cash earn-out potential. This cash earn-out potential is structured to directly align with the company’s Drive to '25 goals.
The acquisition of GeoPhy, which is headquartered in Netherlands and New York City, is expected to bolster growth in Walker & Dunlop's brokerage, lending and emerging businesses, including Apprise (the tech-enabled appraisal business) and small balance-lending (“SBL”) platform. The data analytics and development capabilities of GeoPhy can help the company “disrupt the commercial real estate services industry.” Further, it will likely provide cheaper, better and faster service in real estate compared with its peers through tech-enabled businesses.
Of the total cash earn-out potential, the SBL segment’s maximum earn-out potential is $155 million for mortgage banking gains of $61-$175 million. The origination volume target should be between $1.75 billion and $5 billion. The earn-out is structured in four phases and a portion of it can be earned if the target within the phase is achieved. The entire program is expected to be completed by 2025.
Additionally, the Appraise segment’s maximum earn-out potential is $50 million for generating revenues of $30-$75 million. The earn-out for this is structured in three phases and includes revenue and productivity targets. The productivity target is based on “the annual average number of appraisals issued per month per appraiser.”
Following the closure of the deal, the CEO and co-founder of GeoPhy, Teun van den Dries, will continue to head the firm and will also assume a leadership position in the SBL and Apprise businesses.
Over the past year, shares of Walker & Dunlop have jumped 40% against 46.9% decline of the industry.
Image Source: Zacks Investment Research
Over the past several years, Walker & Dunlop has been strengthening its brokerage and lending solutions through strategic acquisitions. Last year, it acquired Alliant Capital, Zelman & Associates, TapCap and FourPoint Investment Sales Partners. Earlier in 2020, the company acquired Beler Advisory Group, MSF Real Estate Capital and AKS Capital Partners. The company’s inorganic growth efforts are expected to help increase its revenues and provide competitive advantage.
Several companies from the finance sector are undertaking consolidation efforts to improve competencies in a bid to counter the low-interest-rate environment.
In a move to enhance M&A advisory service competencies in the digital-infrastructure sector, Citizens Financial Group, Inc. (CFG - Free Report) announced a definitive agreement to acquire substantially all assets of DH Capital LLC.
The move marks Citizens Financial’s third acquisition over the past few months to augment its corporate advisory team. In September 2021, CFG had closed the buyout of Willamette Management Associates and had acquired JMP Group in November.
Velocity Financial, Inc. (VEL - Free Report) acquired the majority stake in Century Health & Housing Capital. Century, licensed Ginnie Mae issuer and servicer, offers government-insured Federal Housing Administration mortgage financing for multi-family housing, senior housing and long-term care/assisted-living facilities.
The acquisition will help Velocity Financial leverage Century’s well-established platform and diversify revenues with the addition of fee-based origination and servicing income. This, along with VEL’s national origination footprint, offers ample development scope for origination growth and the expansion of commercial mortgage product offerings.
RBB Bancorp (RBB - Free Report) entered a definitive agreement to buy Gateway Bank in a cash transaction valued at $22.9 million in a bid to penetrate the strategic San Francisco Bay Area. The buyout will expand RBB Bancorp’s physical presence in six of nine target markets of Gateway Bank and provide a profitable base to extend the advancement the latter has made in the Bay Area.
The deal is also in line with RBB Bancorp’s aim to establish its relationship-based banking model in the region for the community.
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Walker & Dunlop (WD) Set to Gain From GeoPhy Buyout: Here's How
Walker & Dunlop, Inc. (WD - Free Report) has inked a deal to acquire GeoPhy, a commercial real estate technology company. The transaction, expected to be complete during the current quarter, is subject to approvals.
Per the terms of the transaction, Walker & Dunlop will pay $85 million in cash at the closing in addition to $205 million of cash earn-out potential. This cash earn-out potential is structured to directly align with the company’s Drive to '25 goals.
The acquisition of GeoPhy, which is headquartered in Netherlands and New York City, is expected to bolster growth in Walker & Dunlop's brokerage, lending and emerging businesses, including Apprise (the tech-enabled appraisal business) and small balance-lending (“SBL”) platform. The data analytics and development capabilities of GeoPhy can help the company “disrupt the commercial real estate services industry.” Further, it will likely provide cheaper, better and faster service in real estate compared with its peers through tech-enabled businesses.
Of the total cash earn-out potential, the SBL segment’s maximum earn-out potential is $155 million for mortgage banking gains of $61-$175 million. The origination volume target should be between $1.75 billion and $5 billion. The earn-out is structured in four phases and a portion of it can be earned if the target within the phase is achieved. The entire program is expected to be completed by 2025.
Additionally, the Appraise segment’s maximum earn-out potential is $50 million for generating revenues of $30-$75 million. The earn-out for this is structured in three phases and includes revenue and productivity targets. The productivity target is based on “the annual average number of appraisals issued per month per appraiser.”
Following the closure of the deal, the CEO and co-founder of GeoPhy, Teun van den Dries, will continue to head the firm and will also assume a leadership position in the SBL and Apprise businesses.
Over the past year, shares of Walker & Dunlop have jumped 40% against 46.9% decline of the industry.
Over the past several years, Walker & Dunlop has been strengthening its brokerage and lending solutions through strategic acquisitions. Last year, it acquired Alliant Capital, Zelman & Associates, TapCap and FourPoint Investment Sales Partners. Earlier in 2020, the company acquired Beler Advisory Group, MSF Real Estate Capital and AKS Capital Partners. The company’s inorganic growth efforts are expected to help increase its revenues and provide competitive advantage.
Walker & Dunlop currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Growth Efforts by Other Firms
Several companies from the finance sector are undertaking consolidation efforts to improve competencies in a bid to counter the low-interest-rate environment.
In a move to enhance M&A advisory service competencies in the digital-infrastructure sector, Citizens Financial Group, Inc. (CFG - Free Report) announced a definitive agreement to acquire substantially all assets of DH Capital LLC.
The move marks Citizens Financial’s third acquisition over the past few months to augment its corporate advisory team. In September 2021, CFG had closed the buyout of Willamette Management Associates and had acquired JMP Group in November.
Velocity Financial, Inc. (VEL - Free Report) acquired the majority stake in Century Health & Housing Capital. Century, licensed Ginnie Mae issuer and servicer, offers government-insured Federal Housing Administration mortgage financing for multi-family housing, senior housing and long-term care/assisted-living facilities.
The acquisition will help Velocity Financial leverage Century’s well-established platform and diversify revenues with the addition of fee-based origination and servicing income. This, along with VEL’s national origination footprint, offers ample development scope for origination growth and the expansion of commercial mortgage product offerings.
RBB Bancorp (RBB - Free Report) entered a definitive agreement to buy Gateway Bank in a cash transaction valued at $22.9 million in a bid to penetrate the strategic San Francisco Bay Area. The buyout will expand RBB Bancorp’s physical presence in six of nine target markets of Gateway Bank and provide a profitable base to extend the advancement the latter has made in the Bay Area.
The deal is also in line with RBB Bancorp’s aim to establish its relationship-based banking model in the region for the community.