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With Smartline and The Mortgage Gallery announcing in December that they intend to merge, The Adviser asks whether more industry consolidation is on the cards
In December, two of Australia’s top franchise brokerages announced their plans to join forces.
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Effective 1 April, Smartline will merge with The Mortgage Gallery, resulting in more than 240 franchises nationally for the combined group.
The merged body will be a significant player in the mortgage industry, settling $4 billion in loans per year, with a combined loan book in excess of $17 billion.
“We wanted to grow our footprint quickly and easily and this merger helps us to do just that,” Smartline’s managing director, Chris Acret, says.
According to Mr Acret, Smartline’s 2009 merger with Mortgage Force proved such a success that the company saw no reason not to do the same thing again with another brokerage in 2011.
“The industry is maturing and many brokerages are looking to take the next step in their evolution,” he says. “They either want to grow or get out. Organic growth is very hard in the present environment, so we decided to grow by acquisition.”
Mr Acret adds, however, that while the primary goal for Smartline was to grow in scale, picking the right company was absolutely critical.
“Both groups share similar values and have a similar culture – a culture of helping each other, of professionalism – and a real client focus. Both companies have a franchise model with a commitment to helping their franchise owners succeed and grow,” Mr Acret says.
“I have already received a lot of positive feedback from the industry as well as from all the brokers involved, so I think the road ahead should be smooth.”
While The Mortgage Gallery will retain its brand and management team initially, Mr Acret says Smartline is open to rebranding the business.
“Smartline has a strong brand in the community, which can really help the new franchisees moving forward,” he says.
The merger wheels are now in motion and Mr Acret confirms The Mortgage Gallery is “currently in the process of adopting Smartline’s back-end systems”.
“We will provide all of The Mortgage Gallery’s loan writers with our software systems, training and education support as well as our electronic lodgement platforms,” he says.
“We pride ourselves on our back-end systems, so The Mortgage Gallery loan writers will really benefit from our software solutions.”
The question now, of course, is whether this is the beginning of an industry trend.
Industry consolidation was rampant in the post-global financial crisis period, and brokerages that struggled to make ends meet and provide the necessary support to members merged with larger brokerages or decided to leave the industry altogether.
Four years on, however, industry consolidation has become less common. In fact, there are many industry pundits who believe the days of consolidation have gone
Mr Acret disagrees: Industry consolidation is “natural”, he says, referring to the evolution of this industry.
“I wouldn’t be surprised to see a lot more consolidation within the industry within the next six months. The industry is always evolving and consolidation is a part of that.”
But how many others believe consolidation is natural – and even imminent?
That’s not an easy question to answer; what does seem clear, however, is that the days of small brokerage groups are coming to an end.
The race is now on for distribution.
Ultimately, the brokerage with the largest footprint and distribution capabilities will succeed in winning business and writing high volumes.
“Companies with greater scale will find it easier to survive the downturns,” Mr Acret concludes.
