The majority of private lending businesses are small in size, owned and managed by entrepreneurs. As a result, the industry has not effectively witnessed its fair share of consolidation in the past. Furthermore, there is an almost existential contradiction between financial prospects and self-employment. However, with the influx of institutional capital into the private lending marketplace and more standardization, merging with another private lender or acquiring an institutional investor is becoming a popular occurrence in the private lending business.
As such, we discuss below, key factors private lenders need to consider in preparing their business for a merger or an acquisition;
- A necessary component to a successful merger or acquisition which should not be overlooked is the certainty of a high volume of loan origination as the business would grow in size. Therefore, it is necessary to be certain that there would be more transactions leading to more profit.
- For a valuable private lending business, key components such as loan processing, marketing skills, and investor relations capability must be well considered when preparing for a merger or acquisition.
- Another practical consideration is to make sure you’re creating your company with the intent of selling it. With that, a possible merger or acquisition is very likely to be successful.
- Factors such as the compatibility of the two merging partners, long term visions, and goals are very important before joining forces in the private lending business
- Finally, it is critical that key executives on both sides have a good working relationship. They should also have similar business principles and ideals before the merger or acquisition occurs, as this has led to the failure of mergers in the past.
Private lenders must evaluate the practical preparations and components that are required for a successful Merger and acquisition transaction. To read more on the topic, click the link.
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