Magazine article American Banker

HomeSide Deal Puts Boutique in Spotlight: Cohane Rafferty Says Specialization Helps in Mortgage Banking M&A

Magazine article American Banker

HomeSide Deal Puts Boutique in Spotlight: Cohane Rafferty Says Specialization Helps in Mortgage Banking M&A

Article excerpt

The tombstone ad heralding the deal hangs dead center among the framed ads on the wall at the Harrison, N.Y., headquarters of Cohane Rafferty Securities.

The investment boutique's role in National Australia Bank $1.23 billion deal to buy HomeSide Inc. was its highest-profile assignment to date-and underscored the outsized role the small firm is playing in the consolidation of the mortgage banking business.

Most of the other ads are for smaller mergers and sales of servicing rights that were engineered by the firm, which is headquartered a 40-minute train ride from Manhattan.

In the HomeSide deal, Cohane Rafferty was one of three firms to advise National Australia Bank in what would be the largest merger ever in mortgage banking.

Why would a huge acquirer turn to a small firm like Cohane Rafferty for advice?

"The mortgage business is a fairly complex business with a lot of moving parts," said Joseph J. Whiteside, a consultant to National Australia Bank. "It takes somebody like Cohane Rafferty that specializes in the mortgage business."

It also helps to have relationships with all the major players, said Edward Elanjian, a managing director of Cohane Rafferty. "Understanding the motivation of each constituent was our biggest contribution to the deal," he said. "We had worked with every one of those parties before."

Cohane Rafferty advised Michigan National Corp., which is now owned by National Australia, when it sold its national mortgage operations in 1994. At the time, Mr. Whiteside was Michigan National's chief financial officer.

The firm has also worked for HomeSide and its owners, BankBoston Corp., Barnett Banks Inc., and the venture capital firm Thomas H. Lee & Co.

Cohane Rafferty evaluated Prudential Home Mortgage's servicing portfolio for Thomas H. Lee and BankBoston before the two companies bid on it in 1995.

Investment banking and portfolio evaluation are just two fields Cohane Rafferty has developed since its founding in 1987.

That year Larry Rafferty, Tim Cohane, and William H. Curley Jr. left Thomson McKinnon, where they all worked in the mortgage banking division, to start their own firm. Mr. Rafferty is now chief executive officer, and Mr. Curley is president. Mr. Cohane left the company six years ago.

Cohane Rafferty started out mainly as a broker for servicing deals, which are still a major element of the firm's business.

There is a Wall Street-style trading floor in Cohane's office where auctions of mortgage servicing packages are held. Rather than submitting written bids for portfolios, potential buyers call up salesmen in Cohane Rafferty's office to check what bids are on the trading board before making their own.

Virtually the entire sales force has experience on Wall Street or the mortgage banking business and is comfortable with a frenetic trading atmosphere, Mr. Curley said. "I think the intensity of this process helps the seller obtain the best possible price."

Besides getting sellers the best possible price, Cohane Rafferty finds buyers that suit strategic needs for sellers. While price is a main determinant in finding a buyer, it isn't the only one.

Last year, for example, Source One Mortgage Services decided to sell off the bulk of its $27 billion servicing portfolio. But Source One wanted to build its subservicing business, which entails servicing portfolios for other lenders. …

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