Fintech nCino to purchase SimpleNexus for $1.2B

Fintech nCino is acquiring SimpleNexus in a deal valued at $1.2 billion, expanding its footprint into the independent mortgage banker lending segment.

The financial consideration consists of 13.2 million shares of nCino stock and $240 million in cash. The deal was announced after the market closed on Nov. 16; nCino ended trading that day at $70.89 per share, up 49 cents from its Nov. 15 close.

NCino expects to complete the deal by the end of its fourth fiscal quarter on Jan. 31, 2022. The stock portion is valued at $960 million based on nCino's 20-day trading volume weighted average price of $72.25 per share.

SimpleNexus, which offers a communications app that links the various players in the mortgage process — borrower, real estate agent, loan officer and settlement agent — across multiple systems, has raised a total of $128 million. That included $108 million in a Series B round led by Insight Partners, which is also the largest shareholder in nCino, a cloud-based bank operating system provider. More recently, SimpleNexus acquired mortgage compensation technology company LBA Ware.

NCino has five key questions when it looks at an acquisition target, including “Does the company solve a problem in a way that extends nCino's current capabilities? Does the company have a strong repeatable recurring revenue financial profile that will enable us to accelerate our growth?” said Pierre Naude, its CEO, during a conference call.

SimpleNexus answered those questions "with a resounding yes," he added.

SimpleNexus’s 163% net revenue retention was particularly attractive in the deal. "Each time we add to this platform, that same customer base is investing in more of our product suite, which is a typical scenario that you would see in a high net revenue retention model," said SimpleNexus CEO Cathleen Schreiner Gates. "So we're continuing to add products to the platform that's driving that net revenue retention."

The two companies have very little overlap in terms of customer base. SimpleNexus serves over 300 independent mortgage bankers and approximately 80 depositories, with 41,000 loan officers nationwide.

That provides "a strategic adjacency with significant cross and upsell opportunities, which we estimate initially expands our serviceable addressable market by more than $4 billion," Naude said. "We believe many of our 1,100 bank and credit union customers in the U.S. will be interested in adopting the SimpleNexus home ownership platform."

NCino plans to aggressively market these services to its customers.

There are also cross-selling opportunities from nCino to SimpleNexus customers, such as when clientele, after their home purchase, might be looking for insurance or property rehabilitation loans.

NCino does not plan to enter the mortgage loan origination system business and compete against ICE Mortgage Technology and Black Knight, Naude said, noting that SimpleNexus is "the largest and best integrated solution into [ICE Mortgage Technology's] Encompass product, and this is just a great complement to what we plan to do, further cementing our focus and growth into the retail market."

Meanwhile, he added, nCino's development of international mortgage products is proceeding as planned.

Schreiner Gates and all of the nearly 300 employees at SimpleNexus will remain on board after the deal is completed.

BofA Securities is financial advisor to nCino, and Sidley Austin LLP is legal counsel. Willkie Farr & Gallagher is the legal counsel for SimpleNexus.