How to M & A Proof Your Job
We are likely to see mergers and acquisitions retake the stage in 2025, not only in the residential real estate arena but also on the relocation management side of the business. They have paused since 2019 based on several factors and market distractions except for a few notable purchases by Compass. The last four years have been a roller coaster, starting with the pandemic shutdown and then the unexpected boon from self-moves fueled by remote work and low interest rates.
I suspect many residential real estate company owners were beginning to think about their future but stepped back as the challenges and opportunities during the pandemic demanded their attention and temporarily dried up the wealth of venture capital money and the buyer pool for companies.
The clock is ticking.
Broker owners are reaching retirement age at a fast pace. The average age of a privately held real estate company owner is around 54.1 years old. This makes them some of the oldest small business owners compared to other industries. And many of these owners do not have solid succession plans in place.
While transactions are down, the market is still relatively healthy, with an average of about four months of inventory. Buyers are growing accustomed to the higher interest rates, and pent-up demand will push some into the market in 2025 who have been watching from the sidelines. It’s not a bad time to sell a company with the projections for home sale price increases hovering around 5% for next year. It all comes down to making the math work for all parties.
As the NAR settlement, appeals, and lawsuits continue to play out, many brokers are on edge about how they might be affected in the long term. The current drama surrounding the future of the Clear Cooperation Policy is likely to negatively affect smaller brokers if the policy goes away. The big brokers and portals will hold the keys to the data based on their sheer size and number of transactions. If they are no longer required to put their listings into the MLS, then the smaller brokers will be disadvantaged without access to that data. The future of MLS and its association with NAR are tenuous at best.
I have the same sentiment regarding relocation management companies. We just don’t need so many of them. There is not enough business to keep all of them healthy, and the smaller ones could benefit from combined synergies. Since household goods providers own many RMCs, they may evaluate whether the RMC side of the business continues to meaningfully contribute to their full-service delivery model. Destination service providers may suffer a similar fate.
While I am not trying to be a doomsday predictor, I believe that all of the above, along with higher interest rates, a lower number of transactions, compressed commission rates, and the likely departure of some agents in 2025, will create an environment that may push some to consider an escape route. There were only 4 million + transactions in the US in 2024. Do we really need 1.5 million real estate agents? It’s time for companies to cut the bloat. The public perception of Realtors is shifting and this presents an opportunity for the cream to rise to the top. While some of these changes may seem dire, they are just part of our industry's evolution.
Building a powerhouse.
The recent acquisition of @properties by Compass left me shocked (I was going to say surprised, but shocked is more fitting). This acquisition is a perfect example of two powerhouses coming together to fill a void that resides in each separate company. It’s a smart strategic move and has just propelled them lightyears ahead of the competition. As the #1 and #8 companies in the US, they are now untouchable. They are basically creating their own broker network that gives them such vast coverage worldwide that once they are done growing, they won’t need any other brokers. That allows them to control their data in a way that solely benefits them and their clients.
Hopefully, they will keep the @properties brand and take a cue from Anywhere by creating a competitive environment among their own brands. The public has no idea who owns real estate companies, giving them a 100% chance of success when the consumer pits them against one another. They can create synergies in the back office to save money and build expertise. And if they really want to take on relocation and global mobility, they already have the back office and the talent to scale it easily.
How do we protect ourselves?
As someone who experienced many mergers and acquisitions in my former roles, I can safely say we can never be fully prepared for what may come. We may be included in the dialog from the very beginning of the exploratory phase, or we may learn about it with everyone else in a public announcement. It may depend on whether any of the companies are publicly held. However it goes down, it is imperative that we work every day as if an acquisition may be on the horizon.
Don’t ever get lulled into believing that your owner won’t sell. Business is business.
Before it happens.
Make sure your leadership knows exactly what you contribute to the bottom line (revenue, profit, and agent compensation)
How many transactions did your department generate as new business?
What did your business contribute to the ancillary services and affiliated partnerships?
How have you helped with recruiting and retention?
Ensure your broker knows how a sale or an acquisition might affect your network affiliation. This could affect the value of your company or of the company you are thinking of buying.
Have an updated resume on hand at all times. Keep your LinkedIn profile up to date.
Make sure you have support from your branch managers and office staff. It’s not us against them.
Learn as much as you can about competing brokers and their departments. That intel could prove very helpful if you become a target of theirs or vice versa.
Trim expenses where possible to show you are managing their money as if it were your own.
This should go without saying, but make sure your leadership always knows the value you bring to the company and the industry.
Once it happens.
Just because your company gets acquired doesn’t mean you will be out of a job. I am living proof of that. When a company I worked for was acquired, they chose me to run the combined department.
When the acquisition or merger is announced, stay positive, particularly in front of the agents. The first few weeks are critical to successfully retaining agents.
Offer to help however you can with the transition, even if it falls outside your usual scope of responsibility.
Be prepared to sell your value (and your department’s value) to the new ownership via a professional presentation. It’s never too late to change their mind.
Find out who you know in the other company and reach out to reinforce the connection and show support.
Ensure your sources of business hear from you, even if you don’t have much to tell them. Silence could feed the rumor mill.
Take to social media to control the narrative.
Give your staff approved talking points to use with transferees and sources of business.
Be your own advocate. Stay positive. You never know how it all may shake out.
