This week we saw the announcement that Trigold and Crystal are to merge. Not a surprise in many ways, as both are among the market leaders for supplying mortgage technology solutions, but their respective technology solutions were focused on different functional niches – Crystal into mortgage point of sale solutions and Trigold in mortgage sourcing systems. By combining their solutions and expertise, they can become a mainstream technology supplier with considerable market muscle.
Importantly their respective business models and skill sets appear to complement each other – Crystal brings their technology platform and their ‘online’ enterprise solutions expertise, whilst Trigold provide great domain knowledge and a wide range of synergistic relationships with lenders and distributors, along with strongly recurring licenses from a client base that will help to shape and drive further profitability.
The overlap in functionality is small and because the two companies have partnered for years, their solutions are well integrated, so a sensible combined sale pitch is available from the start. The main failings would now appear to be outside of their core mortgage market as the combined company is yet to provide a fully competitive Financial Planning solution. They intend to address this later this year and their ability to deliver on that promise will be key if they are to secure their long-term goals.
One strange twist of fate is that Crystal’s offices are right next door to Mortgage Brain so Mortgage Brain and the new entity Trigold Crystal Ltd are now to be found on the same small business park at Bromsgrove in the Midlands.
It will be interesting to see what the knock-on effect within the industry is. Technology suppliers to the market have typically relied on detailed knowledge of Financial Services’ sales and compliance processes. As a result, the big IT companies like IBM and Oracle have often failed to penetrate the market, allowing lots of small specialist companies to serve this space. Someone recently told me that they evaluated 39 suppliers when looking for a sales system – in anyone’s definition that must be an oversupplied market.
From a selfish point of view, the oversupply creates opportunity for consultancy operations like AT8 to use their knowledge and selection methodologies to helps distributors choose the most appropriate solution for their needs from this wealth of suppliers. However, the number and size of these operations may not be sustainable or desirable and we believe further consolidation is inevitable and desirable.
Focus Solutions has long declared its intention to grow the business by acquisition, SSP are now owned by a Private Equity company that typically owns much larger organisations and will surely bankroll further acquisitions. Indeed, despite the current economic climate, rumours are rife in the industry as to who will buy whom.
The industry reshuffle will produce some substantial organisations but mergers don’t always produce the desired results. Technologies may not be compatible, personalities and cultures may clash, strategic stories may not align. Real danger lies in those mergers that happen because they have to happen to survive or to satisfy shareholders rather than the primary motive of creating a strategic competitive advantage. It will be fascinating to watch this space over the next 12 months and to see which companies rise out of the pack as the strategic winners.
