In today’s real estate market, mergers and acquisitions have become increasingly valued and important for brokerage leaders. Whether you’re a longtime franchisee thinking about the next chapter of your journey or a savvy entrepreneur looking to drive growth, there are fundamental shifts happening in the industry to keep in mind should you be considering going down this route. Let’s break a few of these down.
Aging ownership
Throughout my nearly 30 years in this business, I have marveled at the incredible entrepreneurs I have met along the way. So many have been in the industry for 30, 40 and even 50 years, having built their companies from scratch. While much of that time was spent building market share and empowering agents to provide their clients with the dream of homeownership, now may be the time that many look toward their next phase in life.
If you’re one of those looking ahead to what’s next, stepping completely away from real estate may not be what you want. Finding the right merger and acquisition for your company can provide that unique opportunity to stay involved by moving from a leadership role to a practitioner role while keeping your business and legacy intact.
A new growth-focused generation
As we see one generation of broker/owners looking to wind down their businesses, we also have the next one coming along with different views on brokerage operations. These new leaders are not only looking at how they can quickly increase local market share but also how they can expand their footprint by acquiring companies in a new, non-contiguous market. They are seeing the industry as almost borderless – a new phenomenon for many.
Much of this cross-market success can now be achieved largely because of the technology you have at your disposal. By creating a hub and spoke model with back-office services based in one location, you are able to potentially eliminate excess overhead in that new market and actually, in many cases, provide better services for those agents.
It’s all about scale now because companies with the right technology and great operating structures may be able to service 100 agents or 1000 without adding expenses. The greater the scale, the more potentially profitable you can be.
Fewer mid-sized brokerages
That brings us to the third major shift — consolidation is big, and it’s real. In real estate today, it’s very difficult to be a middle-of-the-road independent company like we had for generations. Instead, we’re seeing more success for companies that are either looking to be really big or those who are focused on remaining small and niche. It’s very challenging to play in the middle. Why? Primarily because of the cost of technology, compliance and continuing education issues. The real estate landscape is changing every day, and companies are struggling to keep up. Profit margins have also become extremely tight. Those in the middle often can’t compete with larger players who have the ability and resources to scale up and benefit from reduced overhead.
Is a merger and acquisition the right move for you?
Merger and acquisition support is a part of our brand’s value proposition. We can assist you by helping to navigate the process. You should always have a trusted financial and legal advisor in your corner, as many transactions are very complex.
A typical merger and acquisition will take anywhere from nine to 15 months to get done, so you want to start the conversations about two years in advance. When looking at a potential company, you need to take a deep dive into the numbers, a company’s structure, and the entirety of both operations. In addition to dollars and cents, cultural fit is a major component of the vetting process. You’ll want the right team to guide you through this process.
From my perspective, there is no greater joy than working with a company to fuel future exponential growth.
