Over the past few months, Juan Guzman, a Partner in Solomon Partners’ Financial Institutions Group, attended three conferences focused on real estate and mortgages: The National Settlement Services Summit (NS3), American Land Title Association (ALTA), and the Mortgage Bankers Association Annual Convention and Expo.
Guzman observed cautious optimism among participants who see an opportunity to move beyond the difficult post-pandemic years—characterized by peak inflation and high interest rates resulting in anemic mortgage and real estate volumes. As a result, there has been a decrease in mergers and acquisitions in the mortgage and real estate services sectors, and Guzman expects the deal volume to improve in 2026 and beyond.
Guzman says there are five key attributes that potential acquirers prioritize when assessing M&A opportunities:
- Broad Diversification
Buyers favor businesses that offer diversification, both in terms of geography and product mix. From a geographical standpoint, acquirers look for companies with exposure across multiple localities, certainly in the most populous states such as Texas, Florida, and California, but also in regions where there has been significant migration and / or higher growth over the past several years.
Additionally, buyers prefer to invest in businesses with a diverse customer and product base. If a company’s revenue is highly concentrated on one client, that can create significant concern for buyers after a transaction.
The same applies to businesses that focus too closely on one particular product or service. Therefore, companies that serve a diverse customer base, providing a broad mix of products (i.e., purchase, home equity, refinance, and commercial) across key regions will be attractive targets. - Built to Scale
Acquirers want to invest in companies that can quickly and easily scale, which means identifying businesses in the right size range. Generally, these companies are in the $100 million to $500 million range—a size that both allows for growth without being too big to limit future buyers (from a financial sponsor’s viewpoint) and can potentially move the needle with revenue and cost synergies (from a strategic acquirer’s perspective). - Advanced Technology
Since technology can help a business scale faster, potential buyers look for companies that are tech forward or at least tech enabled. Ideally, the company will partner with top vendors while having systems, procedures, processes, and best practices in place to drive scalable growth. Better yet, full-scale technology companies that can monetize their data and create recurring revenue streams are even more sought after since they can help insulate businesses during cycles.
Looking at deal activity from 2022 and 2023, companies with tech-forward platforms were better able to scale. Many of the better companies have invested in their technology during this slower growth period, which should pay dividends as the pace of activity increases.
In years past, certain sub sectors within the real estate and mortgage industries had mixed views of disruptive technology, ranging from skepticism to existential threats. Nowadays, a large majority of companies are either starting to use Artificial Intelligence or thinking through their AI strategy, with most industry participants excited about the opportunity to leverage technology to drive greater efficiencies, create differentiated products, and improve overall service. - Effective Management Team
In every industry, acquirers seek out talented, cohesive management teams who know their business, have forged great relationships, and are prepared to continue fueling the company’s growth while also having a clear succession plan in place. With the right culture, leadership, and talent development processes, companies can increase their valuation because buyers are better able to gain comfort around management’s ability to hit or exceed their projections. - Active M&A Growth Strategy to Complement Organic Growth
In the mortgage and real estate sectors, market fragmentation, digital transformation, diversification and the focus on scale / reducing costs has created significant M&A strategy opportunities.
Acquirers want to see a healthy mix of organic and inorganic growth, with companies taking advantage of market acquisition and roll-up opportunities to accelerate growth, diversification, and profitability. A strong track record of successful acquisitions and integrations creates excitement for buyers wanting to invest more capital behind a strong management team.
Given the past few years of lackluster real estate and mortgage volumes, acquirers, and target companies across the industry are coming to a consensus that real estate and mortgage volumes are expected to grow, even if, in a worst-case scenario, it is slow and steady. This allows buyers and sellers to have a more congruent view—and a better dialogue—on forecasts and receptivity around M&A and will likely result in increased transaction volumes over the next 18 months.
Learn more about Solomon’s Financial Institutions Group in S&P Global’s profile.
