Brenda White, Salomon Brothers' head of investment banking for mortgage companies, played a role in two of the largest deals this year.
Most recently, she represented GE Capital Corp. in its successful bid for Shearson Lehman Hutton Mortgage Corp. She also represented McAndrews & Forbes in its sale of Troy & Nichols Inc. to Chase Manhattan Bank.
American Banker reporter James H. Saft spoke with her last week.
Q.: How strong is interest in mortgage banking assets?
WHITE: I think it's very strong. And the interest is coming from three different sectors: commercial banks, public mortgage companies, and financial buyers.
Q.: Could you talk a little more about each group?
WHITE: Commercial banks all seem to be interested in enhancing or establishing their presence in the sector.
The public companies, which have access to the cap markets now, are looking to enhance their presence on the originations and servicing side.
And then we still have some interest from financial buyers -- those that have some access to equity capital and are looking to enter the industry. They tend not to be the most competitive in the auctions, but they nonetheless are there.
Q.: Will any companies as big as Shearson be sold soon?
White: The problem is is that when you take a look at the list of the top 10 or 25 mortgage banking companies, the majority are committed to the sector.
Q.: Are we at the top of the market for deal prices?
WHITE: I don't think we are, because I think that as consolidation continues, the larger players will have more of an edge when they are buying servicing. Therefore prices could strengthen.
Q.: What is that edge?
WHITE: As the largest players get bigger, they are able to service for less and employ technology smaller players cannot afford. This allows them to pay somewhat more for servicing rights.
Q.: How interested are acquirers in origination networks?
WHITE: I think there is a tremendous amount of interest in originations today. I think, though, that there is some caution exercised by buyers. They are very interested in volume, but they also want to understand the sustainable volume of a given network.
Q.: There have long been rumblings that a big company outside the industry, someone like AT&T, will make an acquisition. Will that happen?
WHITE: Not now, but that could be the next generation of consolidation.
The current round will enable the largest players to employ state-of-the-art technology in a cost-effective way.
Once we get to that point, there may be industrial companies or large utilities that see that they can bring yet more efficiency to the process. Its possible, but I don't see that on the near-term horizon.