We’ve written ad nauseam about the lousy exit market, but every now and then there’s a PE-backed company just ripe for the profitable picking. Today that company is National Default Exchange, a Texas-based provider of processing services for mortgage defaults, foreclosures and bankruptcy administration. Talk about being situated at the top of a market cycle.
Dolan Media Corp. today acquired NDEx for $208 million, including a $13 million earn-out. That’s actually about $10 million more than the deal was worth when it was agreed upon back in July, which is impressive given that Dolan Media’s stock price is off nearly 20% (the purchase price is a combination of cash and DM stock). Most of that money is going to Trinity Hunt Partners, a lower-middle-market firm that invested $25 million in equity to help launch the company back in 2006.
It would be easy to say that Trinity Hunt lucked its way into its return, but the firm seemed to realize what was coming before most everyone else (or at least was willing to act on its prediction). Here’s what it said in a June 2006 press release announcing the deal: “In 2005, approximately 850,000 properties went into mortgage default and more than 1,930,000 bankruptcies were filed nationwide. With rising interest rates and an increasing number of adjustable rate mortgage (ARM) repricings, it is anticipated that default rates will continue to rise over the next few years.”
Pete Stein, the Trinity Hunt partner responsible for the NDEx, was unavailable for comment.