DLCG Mortgage Group has acquired mortgage software developer Filogix for $58.5 million, which gives it control over “two of the major highways to the lender” in the Canadian brokerage industry, the president of its mortgage network Eddy Cocciollo said.

Announced Tuesday morning, the transaction brings in the core products of Mississauga-based Filogix, such as Expert and FXLink, under DLCG. Filogix’s software forms digital infrastructure that links over 8,000 mortgage brokers with approximately 350 lenders and other industry participants, DLCG (DLCG-T) said in a release.

The Expert platform, for example, supports the end-to-end mortgage application process from submission through underwriting, and provides workflow, compliance and data solutions.

Founded in 2006 and based in Port Coquitlam, parent company DLCG operates through mortgage network Dominion Lending Centres Inc. and its main subsidiaries Mortgage Centre Canada Inc., Mortgage Architects Inc. and Newton Connectivity Systems Inc. DLCG is in business across Canada with a network of over 8,500 mortgage professionals and over 500 franchises. 

Having competed with the "dominant player" Filogix through its technology company, DLCG “pounded that rock for many, many years,” Cocciollo, the president of Dominion Lending Centres, said in an interview with RENX Homes.

A ‘highly strategic’ acquisition

Years ago, it was laughable to think DLCG would own Filogix, he said, but with the acquisition “here we are now, owing that business.”

DLCG acquired Filogix because it is “a business that is important to our industry,” Cocciollo said, and would help improve the company's technology.

“We couldn’t think of a better way of advancing what we do every day,” he said.

Additionally, Filogix had been a strong financial performer and well trusted in the industry, Cocciollo said. Filogix processed approximately $60 billion in annual funded mortgage volumes in the trailing 12 months ended May 31. DLCG expects Filogix to generate approximately $15 million to $18 million of adjusted EBITDA during the first 12 months following closing of the deal.

There is also a sense of national pride to owning Filogix. The U.K.-based Finastra Holdings Limited previously owned the company, and DLCG felt it was critical to have a Canadian company own and invest in Filogix rather than a foreign firm, Cocciollo explained.

Gary Mauris, co-founder and CEO of DLCG, called the acquisition “highly strategic” for expanding the firm’s technology, connectivity and data capabilities and advancing its strategy of strengthening its position across the Canadian residential mortgage market.

The $58.5-million purchase price, subject to closing adjustments, was paid in cash and financed through existing liquidity and committed credit facilities.

In connection with the acquisition, DLCG entered into an amended and restated credit agreement with TD Bank, including a new $65-million term facility.

DLCG on the hunt for more opportunities

The situation remains business as usual to Filogix employees after the transaction, Cocciollo said.

Filogix is to operate as a standalone, wholly owned subsidiary, with operational independence from Newton, which offers its Velocity software.

DLCG plans to invest in Filogix and “make better for the industry,” Cocciollo said. And the company is looking for more opportunities.

“We want to be just like our counterparts in Australia and the U.K., where we are who customers look for, for their mortgage financing needs, first.”