Cross-selling is key for ICE's success post-deal, it says

With the acquisition of Black Knight, ICE Mortgage Technology has increased its "total addressable market" by $4 billion through cross selling opportunities.

But that is not just limited to wider distribution of the data and analytics products that Black Knight was known for. ICE sees opportunities for the loan origination and mortgage servicing platforms to expand their reach as well, said Ben Jackson, Intercontinental Exchange president and chairman of ICE Mortgage Technology.

Jackson joined other Intercontinental Exchange executives on a conference call to wrap up the Black Knight purchase. However little mention was made of the moves needed to drive the deal to the finish line.

For Jackson, the opportunity "is cross-selling Encompass into roughly 40 of the over 100 MSP servicing customers that do not use our loan origination system. This represents roughly 15% to 20% of total annual loan origination volume."

Not addressed was whether any of those customers had been users of Empower, the Black Knight loan origination system sold to Dark Matter, a business funded by Constellation Software.

Dark Matter declined to comment. A request for comment from Intercontinental Exchange had not yet been returned.

But the vertical expansion was just as troubling to some deal opponents as the concentration in the LOS and in product and pricing engines whose resolutions allowed the merger to close. On the other side, is the opportunity to cross sell MSP "into roughly half of the top 150 Encompass customers that do not use MSP today, representing roughly 10% to 15% of first lien servicing market share," Jackson continued.

During the call, Jackson took the opportunity to bring up again the expanded relationship with JPMorgan Chase. The bank is implementing ICE Mortgage's data and document automation platform.

Chase is one of Black Knight's largest servicing customers, "and they are the top five global bank that we are implementing on Encompass on both their retail and correspondent channels, replacing in-house legacy infrastructure," said Jackson.

"This is a perfect example of a large client bringing together a complete front to back experience for their clients through one trusted platform provider and is a model we plan to replicate with many more customers," he continued.

One of the few pieces of the transaction Jackson did address was the Optimal Blue PPE, formerly owned by Black Knight, which acquired it in July 2020..

Jackson referred to the "long-standing relationship" between Optimal Blue and the companies that are now part of ICE.

"Importantly, Optimal Blue is still fully available to ICE's customers with ICE continuing to capture value through an existing revenue share arrangement for existing and new customers," he said.

A 10-year commercial agreement has been entered into that codifies and extends the two-decade long relationship. But given the PPE portion of the Federal Trade Commission complaint, it is no surprise and was probably mandated that the internal engine in Encompass will receive management's attention.

"In parallel, we plan to maintain and invest in our own product and pricing engine, further strengthening the mortgage ecosystem by providing additional options and greater efficiencies to lenders, servicers and partners, ultimately, lowering acquisition costs for lenders and enabling those savings to be passed to the consumer," said Jackson.

When it comes to expense savings, Intercontinental Exchange expects to find $200 million in synergies by the fifth year after the transaction, said Warren Gardiner, its chief financial officer.

"It is worth noting that following the close we have already identified approximately $40 million of annualized savings, giving us increased comfort and our ability to achieve our $200 million target," Gardiner said.