In completing its purchase of an old-economy company last week, the start-up mortgage technology company ClosingGuard.com Inc. made itself profitable and kicked off a coast-to-coast growth strategy that emphasizes acquisitions.
ClosingGuard.com says it has bought itself a solid corporate infrastructure in acquiring McLean, Va.-based MBH Settlement Group LC. The settlement services company, founded in 1994, has 120 employees, to ClosingGuard's 18, and expects revenues of $12 million this year.
The buyer also got itself a profitable company, something ClosingGuard may never have become.
Its new chief executive officer, Greg Jacobson, says more deals are coming for 18-month-old ClosingGuard, which until now limited sales of its technology to settlement companies and loan originators.
Now, he said, the Kew Gardens, N.Y., company plans to use acquisitions and other expansion to build a national network of settlement companies that will incorporate the ClosingGuard platform into their service. The platform gives all involved in a mortgage transaction - lenders, title agents, attorneys, the borrower, even the property seller - access to an Internet file to check the status of the closing.
Mr. Jacobson took over as CEO in December and is leading ClosingGuard's reinvention, said: "I thought that, rather than try to sell settlement companies and then charge mortgage banks for the service of using ClosingGuard, why not acquire settlement companies? Now we can give banks ClosingGuard for free in conjunction with the settlement services that we provide."
ClosingGuard, which did not give the price of the MBH deal, needed a way to facilitate the transactions and bring value to the table. Hence the MBH purchase and similar ones to come.
"Now we can wrap the technology in with the great service that's provided here at MBH, and we can deliver an overall bundled product," Mr. Jacobson said. "We don't have to charge for ClosingGuard; when someone pays MBH for a settlement, they get ClosingGuard for free."
The MBH acquisition takes pressure of ClosingGuard to turn a profit on its technology alone, giving its investors some return on their capital, the CEO continued.
"This not only buys us time, we make money while we're waiting for the world to adopt our technology," the former Countrywide Home Loans executive said. "The technology is great, but I like being in business today to make money."
ClosingGuard will take its expansion drive to Atlanta and Florida, then to Texas and California, and then quickly fill in all the gaps in between, Mr. Jacobson said.
"Our plan is to acquire more companies nationally and to expand in places where we don't acquire," he said. "We've got transactions lined up in all those areas right now, it's just a matter of which ones we do first, second, and third."
MBH has 13 offices in the northern Virginia/Washington area. The merged company will be based in McLean and start with 15 offices in five states. Mr. Jacobson said he has not decided on a name yet.
He sounded relieved by the stability the MBH acquisition has brought.
"As of the close of business last Thursday, I had 18 employees," he said. "Now I have 140. I feel a lot better with 140. We're profitable now on a consolidated basis, and I've got a management staff and a full team of people I can delegate to."
He added: "It's nice to be in the black and have big revenue numbers, and it's nice to have corporate service people," he said. "I'm not making my own copies anymore."
