Walker & Dunlop, Inc 8-K, filed Feb 7, 2022
Walker & Dunlop, Inc. (WD)
About this 8-K
Walker & Dunlop, Inc filed this 8-K on February 7, 2022, reporting on events of February 4, 2022.
Items reported
- Item 1.01: Entered into a material agreement
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01. Entry into a Material Definitive Agreement.
On February 4, 2022, Walker & Dunlop, Inc., a Maryland corporation (the “Company” or “we”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with WD-GTE, LLC a Delaware limited liability company and a wholly owned subsidiary of the Company (“WD Purchaser”), GeoPhy B.V., a Netherlands private limited liability company (“GeoPhy”), the several persons and entities constituting the holders (the “Shareholders”) of all of GeoPhy’s issued and outstanding shares of capital stock (the “Acquired Shares”), and Shareholder Representative Services LLC, as representative of the Shareholders, pursuant to which WD Purchaser will acquire all of the Acquired Shares and the Company has agreed to unconditionally and irrevocably guarantee to the Shareholders the due and punctual payment and discharge by WD Purchaser of the obligations, covenants and agreements of WD Purchaser under the Purchase Agreement (the transactions contemplated by the Purchase Agreement, the “Transaction”).
On the terms and subject to the conditions set forth in the Purchase Agreement (i) upon closing of the Transaction, the Shareholders will receive consideration with an aggregate value equal to approximately $85 million in cash (subject to certain purchase price and escrow adjustments), and (ii) if, as and when payable, the Shareholders will be entitled to receive earnout payments (the “Earnout Consideration”) with an aggregate value of up to $205 million in cash. The Earnout Consideration is allocated up to $50 million payable attributable to the achievement of Apprise (defined below) revenue and productivity milestones and up to $155 million payable attributable to the achievement of small balance lending (“SBL”) volume and revenue milestones. The Earnout Consideration will become payable, subject to the terms and conditions of the Purchase Agreement, upon the final determination of the achievement of the milestones for years ended December 31, 2022, 2023, 2024, and 2025. Upon the terms and conditions of the Purchase Agreement, the payment of the Earnout Consideration is subject to acceleration in the event (i) of the termination of the Company’s multifamily real estate asset appraisal service offering (“Apprise”) and/or the Company’s SBL business unit, (ii) of the winding-down or liquidating of GeoPhy, Apprise or the Company’s SBL business unit, (iii) of any fundamental changes to the nature of Apprise and/or the Company’s SBL business unit, or (iv) that a change of control of WD Purchaser, GeoPhy, or the Company’s indirect wholly owned subsidiary, Walker & Dunlop, LLC, occurs and the acquiring company does not unconditionally and irrevocably assume WD Purchaser’s obligations to perform under the earnout.
The Purchase Agreement contains customary representations and warranties of GeoPhy, the Shareholders, and WD Purchaser. Each party has also agreed to customary covenants, including, in the case of GeoPhy and the Shareholders, covenants relating to the conduct of the business during the interim period between the execution of the Purchase Agreement and the closing of the Transaction and, in the case of certain of the Shareholders, four-year post-closing non-competition and non-solicitation restrictive covenants. In addition, each party’s obligation to consummate the Transaction is subject to certain other customary conditions, including the accuracy of the representations and warranties of the other party, subject to certain materiality standards, and compliance in all material respects by the other party with its covenants. Also, the Purchase Agreement contains customary indemnification provisions whereby the Shareholders have agreed to indemnify, subject to certain limitations and thresholds, WD Purchaser, and certain affiliated parties of WD Purchaser, for certain losses, liabilities and damages.
The Purchase Agreement provides certain termination rights for GeoPhy and WD Purchaser. Specifically, the Purchase Agreement can be terminated upon mutual written consent of GeoPhy and WD Purchaser; by either WD Purchaser or GeoPhy if certain closing conditions are not satisfied or if the closing of the Transaction has not occurred on or prior to March 31, 2022; by either WD Purchaser or GeoPhy if the other party has breached any representation, warranty, covenant or agreement in the Purchase Agreement which cannot or has not been cured within 20 days and gives rise to the failure of a relevant closing condition; and by either WD Purchaser or GeoPhy if applicable law or a legal requirement renders illegal or otherwise prohibits the closing of the Transaction.
The foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Item 7.01. Regulation FD Disclosure.
On February 7, 2022, the Company issued a press release announcing the Transaction, a copy of which is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
The information in this Item 7.01, as well as Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
The following exhibits are filed with this Current Report on Form 8-K:
|
Exhibit Number |
Description | |
| 99.1 | Press Release dated February 7, 2022 | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Walker & Dunlop, Inc. | ||
| (Registrant) | ||
| Date: February 7, 2022 | By: | /s/ Stephen P. Theobald |
| Stephen P. Theobald Executive Vice President and Chief Financial Officer |
Exhibit 99.1
Walker & Dunlop Acquires GeoPhy to
Accelerate Technology-Driven Businesses
Largest Technology Acquisition to Date
Bethesda, Maryland – February 7, 2022 – Walker & Dunlop, Inc. announced today that it has entered into a definitive agreement to acquire GeoPhy, a leading commercial real estate technology company. GeoPhy’s data analytics and development capabilities will dramatically accelerate the growth of Walker & Dunlop’s lending, brokerage, and emerging businesses including Apprise, its tech-enabled appraisal business and its small balance lending (SBL) platform. GeoPhy CEO and co-founder, Teun van den Dries will continue to lead the GeoPhy team and assume leadership of the Apprise and SBL businesses while supporting continued innovation throughout Walker & Dunlop.
Walker & Dunlop Chairman and CEO Willy Walker stated, “This acquisition is a game-changing investment for Walker & Dunlop, as it dramatically accelerates the growth of our technology capabilities in two areas of the market where we have the ability to disrupt the commercial real estate services industry. As our current JV partner in Apprise, we are well acquainted with the GeoPhy team and their capabilities. Actionable technology — that makes our bankers and brokers more insightful and capable — is what has differentiated Walker & Dunlop, and the acquisition of GeoPhy immediately enhances our capabilities.”
“GeoPhy is the largest technology investment we have made and accelerates the achievement of our Drive to ’25 strategy to use technology to grow our existing scaled lending and brokerage businesses, as well as transform the real estate services landscape by developing tech-enabled businesses that will be faster, better, and cheaper than the competition. We are thrilled to bring Teun, his visionary leadership, and fantastic team to W&D.”
Mr. van den Dries commented, “GeoPhy has gained a reputation for its unrivaled capabilities in data science and predictive models, which provide our customers in the commercial real estate space with unmatched efficiencies and insights. We’re thrilled to bring our industry experience and insights to Walker & Dunlop to propel the growth of their lending, brokerage, and emerging businesses. As a combined company, we have the scale, resources, and expertise to truly differentiate Walker & Dunlop’s services in the marketplace. We know W&D, we know the value of their brand and platform, and we expect this acquisition to be a fantastic success.”
Transaction Details
Under the terms of the purchase agreement, Walker & Dunlop will acquire GeoPhy for $85 million in cash to be paid at closing with an additional $205 million of cash earn-out potential structured to directly align with Walker & Dunlop’s Drive to ’25 goals surrounding growth in appraisal revenues, SBL volumes and mortgage banking gains, as detailed below.
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Small Balance Lending(1)
| 2021 mortgage banking gains (MBGs) | $ | 29 million |
| MBGs target to achieve low-end of earn-out | $ | 61 million |
| MBGs target to achieve maximum earn-out | $ | 175 million |
| 2021 origination volume | $ | 515 million |
| Origination volume target to achieve low-end of earn-out | $ | 1.75 billion |
| Origination volume target to achieve maximum earn-out | $ | 5 billion |
| Maximum earn-out potential(2) | $ | 155 million |
| (1) | Earn-out opportunity is structured in four phases. A portion of the earn-out payment can be earned if the specified target within a phase is achieved. | |
| (2) | Full earn-out potential requires achievement of all phases of volume and MBGs milestones by 2025. Earn-out is measured and paid annually. |
Apprise(1)(2)
| 2021 revenues | $ | 9 million |
| Revenues target to achieve low-end of earn-out | $ | 30 million |
| Revenues target to achieve maximum earn-out | $ | 75 million |
| Maximum earn-out potential(3) | $ | 50 million |
| (1) | Earn-out includes revenue and productivity targets, with the latter target based upon the annual average number of appraisals issued per month per appraiser. | |
| (2) | Earn-out opportunity is structured in three phases. A portion of the earn-out payment can be earned if the specified target within a phase is achieved. | |
| (3) | Full earn-out potential requires achievement of all phases of revenue and productivity milestones by 2025. Earn-out is measured and paid annually |
The transaction is expected to close during the first quarter of 2022. Closing is subject to certain approvals and consents.
J.P. Morgan Securities LLC is acting as advisor to Walker & Dunlop, and Arnold & Porter Kaye Scholer LLP and Stibbe are representing the Company as legal counsel. Houlihan Lokey is acting as advisor to GeoPhy, and Wilson Sonsini Goodrich & Rosati and Biesheuvel Jansen Advocaten are representing GeoPhy as legal counsel.
About Walker & Dunlop
Walker & Dunlop (NYSE: WD) is the largest provider of capital to the multifamily industry in the United States and the fourth largest lender on all commercial real estate including industrial, office, retail, and hospitality. Walker & Dunlop enables real estate owners and operators to bring their visions of communities — where Americans live, work, shop, and play — to life. The power of our people, premier brand, and industry-leading technology enables us to meet any client need – including financing, research, property sales, valuation, and advisory services. With over 1,000 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune’s Great Places to Work® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.
About GeoPhy
GeoPhy, with international headquarters in the Netherlands and U.S. headquarters in New York City, provides CRE professionals with instant access to unique data and hyperlocal insights so they can find, evaluate, and close more deals in less time with greater confidence. GeoPhy is making the world of commercial real estate more transparent, efficient, and faster.
Forward Looking Statements
Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws, including statements relating to: (1) the expected strategic benefits of the acquisition of GeoPhy, (2) the anticipated date of completion of the acquisition; and (3) any assumptions underlying the foregoing statements.
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The forward-looking statements reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.While the forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to (1) GeoPhy’s ability to obtain the consents and approvals required to close the transaction and satisfy other closing conditions, (2) general economic conditions and multifamily commercial real estate market conditions, (3) significant costs related to the transaction, including unexpected costs or liabilities that may arise and (4) our ability to successfully integrate GeoPhy’s operations into our current business, including the retention of their employees, and achieve the expected benefits from the transaction.
For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled ''Risk Factors" in our most recent Annual Report on Form 10-K, as it may be updated or supplemented by our Quarterly Reports on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com
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