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Trail book prices rise by 50% in past year, says M&A specialist

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Australian Broker | 07 Mar 2014, 08:30 AM Agree 0
‚ÄčInsatiable demand for mortgage trail books is pushing prices up, says the head of a leading mergers and acquisitions firm.
  • John Whitten | 07 Mar 2014, 10:03 AM Agree 0
    People are giving away their trail at 1.8 times. The only reason anyone would sell their trail for 1.8 times would be if they were having cash flow problems. Over 10 year term the multiplier even with run off would be at least 5 times. Don't give your money away.
  • marty mcdonald | 07 Mar 2014, 12:58 PM Agree 0
    Agree with John. Why you would sell for 1.8 times is beyond me. If you start with a $100 mil book and have a 20% pa runoff after 10 years the total trail paid would equate to $600K plus in income.

    The fact that private equity groups are trying to buy them tells me we are grossly undervaluing their worth. + 3.5 times is about what they should be trading at IMO.
  • Mander | 07 Mar 2014, 02:38 PM Agree 0
    What book runs off at 20% after 10 years? Average CPR is more like 20% per annum or more. Particularly when you brokers churn the book.

    That's why the multiple is between 1 and 2.
  • Robert | 07 Mar 2014, 02:40 PM Agree 0
    Zero chance under 2.5.
    Good business 2.5 times plus. I recently knocked back 2.6 times and said comeback at 3.3 times.
    My trail is $40k per mth.
    It will rise higher into 2015.
  • marty mcdonald | 07 Mar 2014, 03:18 PM Agree 0
    @Mander. What? Plenty of books run off slower than 20% pa. I said in the first 10 years not after 10 years!
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