Ready Capital Announces Acquisition of Madison One
Ready Capital (NYSE: RC) has acquired Madison One Capital, M1 CUSO, and Madison One Lender Services, expanding its footprint in the government guaranteed loan sector. Madison One is a key player in USDA and SBA loan origination and servicing, targeting small businesses and energy projects in rural areas. The acquisition aims to diversify Ready Capital's revenue and increase its scale in gain-on-sale businesses. Expected to generate over $300 million annually in USDA loan volume, the acquisition will enhance Ready Capital's offerings in government-guaranteed small business loans. Madison One will continue operating under its current name as a subsidiary of Ready Capital.
- Acquisition increases Ready Capital's annual USDA volume by over $300 million.
- Madison One's integration diversifies Ready Capital's revenue sources.
- Strengthens Ready Capital’s position as the fourth largest originator of SBA 7(a) loans.
- Expands Ready Capital's reach into rural small business and energy project financing.
- Madison One continues to operate under its established name, preserving brand value.
- Potential synergies between Ready Capital and Madison One may enhance operational efficiency.
- Terms of the acquisition were not disclosed, creating uncertainty regarding financial impact.
- Potential integration risks could disrupt current operations.
- No immediate mention of cost savings or financial synergies.
- Absence of specific financial figures related to Madison One's performance prior to acquisition.
Insights
The acquisition of Madison One by Ready Capital is a significant move. First, it strategically expands Ready Capital's presence in the government-guaranteed lending sector, particularly in USDA-backed loans, a niche that holds high-profit margins. Second, the acquisition is expected to contribute more than
From a financial perspective, the deal enhances Ready Capital's diversification, reducing its dependency on SBA 7(a) loans. This is important for mitigating risk and ensuring stable income streams. Although the terms of the transaction were not disclosed, the expected increase in gain-on-sale earnings could be a positive indicator for investors looking for growth opportunities within the company.
Moreover, acquiring a firm like Madison One, already established in the USDA lending market, allows Ready Capital to leverage Madison One's expertise and existing relationships. This could translate into a more efficient integration process and faster realization of synergies. In the long term, the combined entity might command better pricing power in the market, enhanced by their larger scale and diversified offerings.
However, it is essential to monitor how well Ready Capital integrates Madison One into its operations. Mergers and acquisitions come with integration risks, including potential cultural clashes and the alignment of business processes. Additionally, the lack of disclosed financial terms means investors must wait for quarterly reports to assess the actual financial impact.
From a market perspective, Ready Capital's acquisition of Madison One strategically positions the company in a robust and growing sector. The focus on USDA and SBA guaranteed loans means tapping into a market supported by government initiatives aimed at fostering small business growth and rural development. This sector enjoys relatively lower default rates due to government guarantees, which can significantly attract risk-averse investors.
The addition of Madison One's branding and customer base can also enhance Ready Capital's market share and competitive edge. Their established reputation and expertise could expedite market penetration, especially in rural and small business markets where trust and relationships play critical roles.
The acquisition aligns well with the increasing demand for sustainable and community-focused financing solutions, resonating with current trends towards investing in 'green' and socially impactful ventures. This could appeal to ESG (Environmental, Social, Governance) investors looking for companies with strong social impact narratives.
Nevertheless, maintaining Madison One's name and operational structure suggests that Ready Capital is mindful of preserving the acquired firm's brand value and customer trust, which is a prudent approach. However, it also means that Ready Capital must adeptly manage dual brands and potentially differing operational practices.
Legally, the acquisition of Madison One by Ready Capital appears to be straightforward and well-structured, given the involvement of reputable advisory firms and legal counsels. The continuation of Madison One's operations under its brand, while reporting to ReadyCap Lending, suggests a seamless transition plan designed to minimize operational disruptions and maintain client confidence.
The regulatory landscape for government-guaranteed loans, such as USDA and SBA products, involves strict compliance requirements. Ready Capital's existing expertise in SBA 7(a) loans positions them well to navigate these regulations. However, integrating Madison One's operations will require meticulous compliance management to ensure adherence to USDA lending standards, which may differ from SBA regulations.
The transaction brings up potential legal considerations around the integration of different corporate compliance cultures and practices. With Madison One's team joining Ready Capital, there will be a need to harmonize employee protocols and client servicing standards to avoid any legal or operational conflicts.
In summary, while the acquisition is poised to create substantial business synergies, it is imperative for Ready Capital to ensure rigorous compliance and integration measures to mitigate any legal risks involved.
Allows Leading Non-Bank SBA Lender to Expand its Presence in Government Guaranteed Lending Sector Via USDA and SBA Originator and Servicer.
NEW YORK, June 11, 2024 (GLOBE NEWSWIRE) -- Ready Capital Corporation (NYSE: RC) (“Ready Capital” or the “Company”), a multi-strategy real estate finance company that originates, acquires, finances and services small-to-medium balance commercial loans, today announced that it has acquired Madison One Capital, M1 CUSO and Madison One Lender Services (together, “Madison One”), a leading originator and servicer in the highly profitable government guaranteed loan industry focusing on United States Department of Agriculture (“USDA”) and SBA guaranteed loan products. Terms of the transaction were not disclosed.
The transaction will expand Ready Capital’s presence in USDA lending through programs that support guaranteed loans for small businesses and energy projects in rural areas. The addition of Madison One, a leading USDA lender and servicer, meets Ready Capital’s objective to diversify revenue sources and increase scale of gain-on-sale businesses. Ready Capital is already the fourth largest originator of SBA 7(a) loans to small businesses.
Ready Capital Chief Executive Officer, Thomas Capasse said: “We're excited to acquire Madison One, a leading USDA loan originator and servicer. The transaction is expected to generate more than
“Partnering with Ready Capital gives Madison One a direct balance sheet, enabling growth of our USDA platform and more flexible financing for rural clients,” said Jason Bengert, a Managing Director of Madison One. Chris Balestrino, also a Managing Director of Madison One, added that “We look forward to the many synergies we can benefit from as part of a larger platform, positioning us to extend even more capital into rural America.”
Madison One will operate as a subsidiary of Ready Capital using its current name and brand. Madison One’s entire team, led by Managing Directors Jason Bengert, Chris Balestrino and Servicing Director Lindsey Billings have joined the new subsidiary. The Madison One business line will be managed by ReadyCap Lending, reporting to Gary Taylor, ReadyCap Lending CEO.
Ready Capital was advised by Harbor View Advisors and Alston & Bird LLP served as legal counsel in this transaction. Madison One was advised by Burntside Advisors with legal counsel provided by the Lewis Firm.
About Ready Capital Corporation
Ready Capital Corporation (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services lower-to-middle-market investor and owner occupied commercial real estate loans. The Company specializes in loans backed by commercial real estate, including agency multifamily, investor, construction, and bridge as well as U.S. Small Business Administration loans under its Section 7(a) program. Headquartered in New York, New York, the Company employs approximately 350 professionals nationwide.
About Madison One
Madison One is a leading originator and servicer in the highly profitable government guaranteed loan industry focusing on USDA and SBA guaranteed loan products. Madison One is headquartered in Scottsdale, Arizona and employs 30 professionals. For more information visit https://www.madisonone.com.
Contact
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InvestorRelations@readycapital.com
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