Last week, Mike Rubin, President of Shaddock National Holdings, joined Qualia’s Director of Business Development, Max Lamb, for the first session of Qualia’s Executive Perspectives series. Rubin is responsible for The Shaddock Companies’ mergers and acquisitions activity and agency management nationally. The Shaddock Companies are the largest collective of independent title insurance agencies in the nation.
Rubin believes the biggest opportunity and threat for title & escrow businesses over the next five years is consolidation. While consolidation has been trending up for several years in the title space, Rubin believes the number and frequency of mergers will only continue to accelerate—especially as more title owners make the decision to exit in the face of a market downturn.
As title & escrow companies evaluate whether they will remain steady, grow (through acquisition or otherwise) or eventually exit the space due to rising competition and market changes, technology will be a decisive factor for success. Rubin and Lamb discussed the rise of technology solutions in the title space, what it means for title businesses, and how businesses on both sides of the buying and selling equation can position themselves for success.
Title-related technology is emerging at a faster clip than ever before
Rubin and his team are plugged into the technology landscape, yet they are still surprised by new vendors all the time. “It’s been amazing to watch the vendor space explode over the past few years,” he said. “At NS3 [the 2022 National Settlement Services Summit], nearly 30 percent of the vendors I’d never even heard of.”
For example, new remote online notarization (RON) solutions have burst onto the scene over the past several years in response to COVID-19 and changing state-level regulations. Rubin noted that because of the availability of eClosing solutions, RON is now practically the norm among national companies with heavy refinance volume. Whereas a few years ago, Rubin would see a few RON closings here and there, now he sees them daily. “[These businesses] are lightyears ahead and using technology in really incredible ways,” Rubin said. “I can’t wait for it to filter down the chain and impact residential transactions in a meaningful way.”
Title companies with aspirations to buy or sell should place greater weight on technology and security due diligence
In addition to an influx of “point solutions” for title companies (technology designed to solve single business challenges, like remote signings), Rubin also noted the growing prevalence of SaaS platforms that virtually didn’t exist in the space until about seven or eight years ago in the title industry.
Rubin noted that SaaS platforms have changed the game by helping title companies offload their server maintenance, file storage, and the intricacies around networking and firewalls. When his team evaluates title companies for a potential acquisition into the Shaddock umbrella, one of the greatest risks in their acquisition strategy is the technology of the acquired company and what their technology infrastructure looks like beneath the surface. With title companies on SaaS platforms, much of this evaluation is simplified through Shaddock’s understanding of the reputation and standards of the SaaS provider.
This infrastructure is also paramount for Shaddock to trust the security of the newly acquired title company. Rubin noted that 2-3 days after an acquisition announcement, the potential for fraud triples. “Being ready on day one with security measures in place is really important to us,” he noted. “It gives us a checkbox to know we’re covered.”
Rubin’s advice for a successful merger or acquisition
In light of the current market slowdown, acquirers are facing more attainable selling terms from companies looking to exit the market compared to the past two years. Meanwhile, more title companies are interested in selling their businesses in the near future as the record-breaking revenue of the refinance and purchase boom tapers off.
Regardless of where acquisition opportunities are coming from, Rubin recommends that businesses considering an acquisition inspect company culture closely as part of their due diligence plan. “A business may look wonderful on paper, but the culture just doesn’t sync up,” he said. In these cases, attrition typically accelerates after the acquisition and the benefits of the purchase are practically nullified.
Another important thing to consider during the due diligence process is the number of systems and processes that are broken. “Don’t assume you can fix something that’s broken,” Rubin warned, explaining that even if the item is “fixable” the acquiring business may not have the time, resources, or ability to fix them.
Interested in hearing more executive perspectives on current market trends? Register below for Qualia’s Executive Perspectives webinar series.