In today’s mortgage banking environment, merger and acquisition activity continues to create both opportunity and complexity. Most M&A conversations start with valuation, yet the strongest transactions start preparation much earlier. While valuation often dominates the conversation, one question tends to have an outsized impact on transaction success:
Is the company ready for diligence?
In our latest video, Kenny Burch and Shane Votto discuss a common theme they continue to see across mortgage banking transactions: buyer confidence is often built long before a letter of intent is signed.
Buyer Confidence Starts with Financial Readiness
Buyers want more than financial statements. They want confidence in the systems, processes, and assumptions behind them.
Delayed closes, unsupported balances, unexplained fluctuations, and incomplete reconciliations can all lead to additional questions during diligence. While these issues may not stop a transaction, they frequently extend timelines and increase scrutiny.
The Cost of Surprises
One of the most practical observations from the discussion is simple:
No one likes surprises.
Unexpected liabilities, unresolved audit findings, unsupported estimates, or compliance concerns discovered during diligence often create unnecessary friction. The strongest sellers identify and address these issues before a buyer uncovers them.
What Buyers Often Scrutinize
Mortgage banking transactions often involve complex estimates and specialized assets.
Buyers frequently focus on mortgage servicing rights, reserve methodologies, hedging performance, warehouse financing arrangements, fair value measurements, and contingent liabilities. Their primary objective is consistency, supportability, and confidence in the underlying assumptions.
Preparation is Key
For lenders considering a transaction in the next 6-12 months, preparation can make a meaningful difference. That preparation includes:
- Reconciling key accounts
- Supporting significant estimates
- Documenting accounting positions
- Reviewing controls and key processes
- Conducting internal diligence before buyer diligence begins
The strongest transactions rarely begin when a buyer arrives. They begin months earlier through thoughtful preparation.
Watch our latest video featuring Kenny Burch and Shane Votto to learn how lenders can navigate today’s M&A landscape and avoid common pitfalls that emerge during diligence.
Watch How Lenders Can Navigate the M&A Landscape – Part 1: An Audit Lens
Stay tuned for Part 2 of the series, where we’ll discuss the tax considerations that can influence transaction structure, economics, and outcomes.
