This guide supplies basic information about different valuation methods. To improve accuracy when determining the value of an acquisition, we recommend that you use and compare more than one method. After all, you need to know how to value your title agency to price it correctly and maintain leverage during negotiations.

Start With a Foundation: The Market Approach

Before looking at your agency’s internal numbers, we recommend doing some market research. With this approach, you determine the agency’s value based on similar businesses in your region and other factors, including physical location, ease of access, and local safety statistics. With some research, you can determine an average amount or range to use as a baseline comparison against the results of other methods.

Check the Assets: Adjusted Net Asset Method 

With ANAM, you start with a list of the agency’s tangible and intangible assets and their combined value. These types of assets include the prices for all property, such as buildings and structures, office equipment, furniture, intellectual property investments, and inventory. With some items, you base the value on the amount you would ask for when selling an item after considering depreciation. Once you have this total, subtract liabilities, such as expenses, bills, interest, taxes, and loans.

Look at Cash: Discounted Cash Flow Method

Cash flow can help a buyer determine if your agency is successful. When a title agency has excellent cash flow, the owner has working capital to use. The agency’s value is based on future projections related to potential growth and discounts. Different factors must be considered when looking at the cash flow, such as outstanding debts or loans, current earnings, the percentage of earnings stability, and economic influencers like inflation.

Consider All Revenues: Capitalization of Earnings Method

You might also apply the amount you earn in a year to the total based on a percentage. For example, let’s say your title agency is worth, based on industry standards, two times your revenues. Experts recommend talking to a business appraiser or stockbroker to determine an exact amount to use when considering revenues with this method.

Eye to the Future: Earnings Multiplier Method

Lastly, given that many investors base value on profits, you might determine how to value your title agency by looking at your profits and applying a multiplier.  With this method, you apply a multiplier times the net income to arrive at a value. This method is the “gold standard” in valuing title agencies. The issues are 1. what is the multiplier, and 2. what time period does one apply the multiplier? By way of example, if your net income were $1M in 2022, taking a five multiplier, the agency’s value is $5M. Multipliers are affected by many factors, including the age of the agency, efficiency, margins, employee tenure, and a whole host of other potential factors. While this method is the most prevalent, it is the most subjective and subject to manipulation pendant on the valuation goal. 

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1. Hire a Team of Multidisciplinary Advisors

A company should hire a legal team that has extensive experience with all areas of title insurance acquisition to guarantee proper handling of legal requirements. They should also invest in an experienced financial advisor who can provide critical transactional advice, review financial details and help with preparing various information releases. A financial advisor might even help with locating potential buyers and assisting with negotiations. It’s important to have part of the team strictly dedicated to negotiations. Beyond legal and financial advisors, they might include the Board of Directors or the CEO.

2. Attract More Than One Interested Party

Although luck can play a role in any sale, planning more often than not leads to the best deal. A company should use contacts within their team to help them find interested parties. They should offer competitive bidding, which attracts multiple interested parties by promoting the idea that the company is worth a fight. When only one bidder exists and that party knows this fact, a company loses any leverage they might have had in a more competitive, multiple-bidder environment. 

3. Present All Information in Accessible Formats

The team can break down all information-release options. They should promote slide decks as one format to provide prospective buyers details about the company. Think of a deck as a story summary of the company’s business website that focuses primarily on how the company offers market opportunities. Once interest exists, the company can create additional decks that focus on specific areas like financials and products. An online data room is another option that goes even further. It’s a secure and confidential resource for all documents pertaining to the transaction, especially documents like financial statements that highlight the company’s worth.

4. Require Legal Protections from All Parties

To prevent competitors and criminals from using confidential and proprietary information to their advantage, a company should invest in legal and security protections and require compliance. They should set up widescale tracking and reporting of interactions with the data room and document. They should also demand that all parties sign a Non-Disclosure Agreement that details every possible scenario related to the use of shared information. 

It’s obvious that all these processes take up business hours, especially when company representatives must build their team, prepare error-free documents and set up a data room and all relevant security. They must also prepare for bidders performing due diligence, which requires them to set aside time to prepare and provide additional documents to interested parties. That said, they can also benefit from this process immensely. For example, they can use tracking and reporting data to help with negotiations by determining the interest levels of bidders and the specific areas of the company or deal that matter to them.

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HomeLight Resists Current Trends

Although the housing market is hot at the moment, finance experts agree that it’s starting to cool because of the impact of the pandemic, inflation, world events, and national and international economic instability. Most companies aren’t making these types of growth moves. Instead, they’re downsizing in preparation for more significant economic problems projected for 2023. For example, many publicly traded real estate companies, such as Compass and Redfin, have laid off hundreds of workers.

Why Has HomeLight Taken This Approach?

HomeLight’s recent fundraising and proptech fintech merger remain in line with its September 2021 Series D funding round announcement. The fundraising is an extension of that round contributed by pre-existing lead investor Oren Zeev of Zeev Ventures. Per HomeLight, the company has handled more than $1 billion in real estate transactions a year since its inception in 2012. As noted by HomeLight in an October 2021 press release, HomeLight experienced 700% growth since the January 2020 launch of its Trade-In and Cash Offer products.

According to HomeLight’s CEO and founder, Drew Uher, HomeLight’s business is “stronger than ever.” HomeLight can fuel operations, meet agent demand, expand, and prepare for whatever comes next with the economy. The combination of the fundraising and proptech fintech merger allows HomeLight to handle uncertain times offensively and defensively. Uher acknowledged the market instability. He told the media that he was closely watching it. He’s prioritizing methods to strengthen various areas and has slowed HomeLight’s hiring through the end of 2022 as a preventative measure.

How Does a Proptech Fintech Merger Benefit HomeLight?

By the end of September, HomeLight had raised a total of $363 million. Per Crunchbase, it has raised more than $742 million in over 15 rounds. Accept Inc was its third acquisition after Disclosures.io in August 2020 and Eave in July 2019. HomeLight can expect billions in combined referred real estate transactions yearly with the Accept Inc merger. The 2022 Q1 numbers already bypassed a combined $3 billion in referred transactions. Its current valuation is $1.7 billion.

Uher noted that HomeLight’s primary goal was to reduce friction between agents and clients. HomeLight initially moved from using AI and digital innovation technologies to provide referrals between agents and real estate investors to offering title, escrow, and mortgage lending services. After volatility set in with the market in recent years, HomeLight expanded to digital tools that would help agents outcompete other real estate companies in their local markets. A fintech firm like Accept Inc gives HomeLight’s agents a financially competitive edge.

Accept Inc., an iLender, provides its customers who qualify for a mortgage a way to submit all-cash offers when they don’t have the cash to do so. Accept Inc. fronts cash to a mortgage-approved homebuyer to take advantage of an upfront cash payment discount or make an upfront cash payment negotiation when multiple buyers show interest. HomeLight’s leadership considers the Accept Inc proptech fintech merger a “strategic move” that makes it possible for their “top agents” to be even more competitive by taking advantage of Accept Inc’s contingency-free cash transactions.

The post Proptech Fintech Merger: Proptech Firm HomeLight Acquired Fintech Company Accept Inc for $60 Million first appeared on titlecapture.com.

Black Knight’s business involves providing processing services for mortgage lending companies. Its platform processes close to two-thirds of mortgage loans in the United States, making Black Knight the principal player in that niche industry. The company currently employs around 6,500 employees, with 2,000 located at its Jacksonville, Florida headquarters.

According to the company’s website, Black Knight real estate data, software, and analytics help deliver practical and straightforward real estate solutions. The site profile also mentions that Black Knight real estate data improves relationships with customers and drives up productivity. Additionally, the company touts its Paragon MLS system online as cutting-edge and award-winning, boasting that over 200 associations in Canada and the United States rely on it.

A long, layered 60-year history precedes the company that Black Knight is today. The core of the business that it would become was bought and sold several times and cycled through various names. Founded in 1962, Computer Power Inc. represented its earliest iteration. Alltel Corp acquired Computer Power in 1991. In 2003, the financial processing services portion of Alltel’s business was bought by Fidelity National Financial Inc., a title insurance company. Fidelity got a site in Jacksonville on Riverside Avenue as part of the deal and moved its headquarters from Santa Barbara, California, shortly after the buyout.

In 2006, Fidelity National Information Services, Inc. (FIS) spun off its parent company to independently manage the financial processing services. Later, this business again separated to become Lender Processing Services, Inc. Fidelity National Financial Inc. reabsorbed what it had lost by acquiring LPS in 2014 before breaking it off in 2015, this time with an initial public offering. At last, Black Knight took shape. It is soon to become part of the suite of financial networks managed by International Exchange Inc.

The CEO of Black Knight, Anthony Jabbour, was quoted as saying that ICE shares a vision in common with his company. He expressed confidence that Black Knight’s mission to streamline processes for homeowners while improving experiences for stakeholders and clients would continue. Considering both companies bring significant expertise to the table, Jabbour reportedly believes the acquisition will ultimately benefit all parties by producing ever better methods of helping clients find a home, obtain a mortgage, and manage homeownership.

Jeffrey Sprecher, ICE’s chair and chief executive released a statement asserting that Black Knight real estate data and services “mesh” well with their existing business offerings in the mortgage loan industry. While it is now best known for its 2013 New York Stock Exchange purchase, ICE has operated multiple trading platforms since its founding in 2000. The company has dealt with contracts in commodities as diverse as sugar and crude oil, meaning ICE has arguably influenced the economics of national gasoline and grocery prices in its time.

The $85 stock price that ICE offered and agreed to pay is approximately 30% higher than the trading price had been last month for Black Knight (before there was any public awareness of a deal). While trades had mainly ranged in the $50s, the stock price was only $7 on April 5 when Bloomberg News broke the story that Black Knight was engaged in possible buyout talks with private equity firms. After releasing that information, the stock price jumped to $66.27. After ICE confirmed the transaction, it similarly surged before market closing on May 4, from $9.21 to $72.84.

While ICE did not release any additional details at the time of its announcement, it indicated that more discussion would take place at its next regularly scheduled quarterly meeting in May. The boards for both companies have approved the acquisition; however, Black Knight’s shareholders still need to sign off on it before they may move ahead. Assuming success on that front, the final hurdle will be passing scrutiny from federal regulators. Thus, the expected close of the buyout for the Black Knight real estate data company is not expected until early 2023.

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