When it comes to growth strategies, there are many directions a broker or owner can take to elevate their business to the next level. While many look first at opening new offices or attracting new agents to their brokerage, an often-overlooked course is that of mergers and acquisitions (M&As). From growing market share to broadening team skills and market knowledge, pursuing a merger or acquisition can be a beneficial decision for your company. However, there are a variety of factors to consider to set a successful path ahead for your company now and in the future. At CENTURY 21 Real Estate, you’re not alone on this journey. Just as your agents are there to guide their home buying and selling clients, our Franchise Sales teams are here to support you throughout the entire M&A process so that you have all of the information and resources needed to choose the right path for your brokerage.
We sat down with two of our Century 21 Real Estate leaders – Evan Barnes, President of CENTURY 21 Jackson Real Estate and Jennette Phillips Toderick, Broker and CEO of CENTURY 21 Union Realty Co. – who have effectively integrated M&As into their own growth strategies to learn more about their approach to the process and advice for others looking to do the same.
WHAT ROLE DO MERGERS AND ACQUISITIONS PLAY WITHIN YOUR CURRENT OVERALL BUSINESS GROWTH STRATEGY?
BARNES: I would say M&As encompass ninety percent of our company growth strategy. By continuously seeking new opportunities, both within our existing markets and newer areas, we have grown our market share from 9% to 24% in just 5 years. And that’s within a region that currently has over thirty other brokerages offering home buying and selling services.
TODERICK: Mergers and acquisitions have been a significant part of our company’s growth strategy for the last couple years as we have been looking to gain a competitive edge in our marketplace and acquire new skill sets. In my opinion, it is the fastest way to double your agent count and really grow at a much faster pace.
FROM YOUR EXPERIENCE, WHAT ARE THE BENEFITS OF GROWING YOUR BUSINESS IN A NEW MARKET VIA M&A VERSUS OPENING A NEW COMPANY OFFICE?
BARNES: In my first few months of ownership I opened a cold start office. It was terrible. No one knew me yet in the industry, and I did it inside of a town I was not familiar with. Now I understand that an M&A allows you to develop existing agents and build upon the foundation that the previous owner has created in that market. The key is to ALWAYS be looking for an M&A. Bring up the topic with brokers and at local association meetings, let everyone know that YOU are the person to call if they are considering retirement.
WHAT ARE THE TOP 3 THINGS BROKERS AND OWNERS SHOULD LOOK FOR WHEN CONSIDERING A COMPANY FOR MERGER OR ACQUISITION?
- Culture is the number one factor I consider. When companies come together and do not share common goals or beliefs you are setting yourself up for failure. It can potentially compromise the beliefs and behaviors of your current leadership, employees and agents. I learned a long time ago from a great mentor of mine David Kellerman, if you pull into the parking lot and dread seeing certain cars parked there you know it’s not a good fit.
- The second most important consideration is cost. Go over the finances of the company you’re looking to acquire and make sure to investigate its background. How is their current market share? Are their numbers up or down? Do the numbers match up?
- Lastly, retainability. Do we have existing relationships with any of the agents currently there? Will the current management be supportive of this change?
- First, is the existing culture and reputation of the agents in the target. I will not jeopardize my company and plan as a whole with agents who are perceived to be dishonest or cannot work well with others.
- Second, I look at the physical distance from my other offices. In my current business structure, I personally spend a lot of time traveling between the offices, so location is very important.
- Third, I look at what the situation is for the building they are occupying. Part of my goal is to acquire the real estate. If they rent, I determine if there is a building close that I can buy and move them in to, or if the building they are in can be purchased.
WHAT OBSTACLES HAVE YOU FACED IN THE M&A PROCESS?
TODERICK: Unfortunately, there is no instant gratification in a merge or acquisition. It takes time. There will be hiccups in remodeling and not everyone will trust you the way your current office does. Nothing is perfect. All you can do is learn from it and move on. I’ve learned to really just be honest and upfront – to be an open book with everyone involved.
IS THERE EVER A SITUATION WHEN PURSUING AN M&A IS NOT THE RIGHT DECSION?
BARNES: Never complete an M&A without first having developed relationships with the agents you are acquiring. Every day of your business you should be treating all agents kindly and fairly, not just because it is the right thing to do, but because those relationships will usually come back around to benefit you during an M&A. There is nothing keeping your company from having a mass exodus after an M&A, which could prove fatal. The relationships you have formed along the way with these agents are the foundation to your growth.
TODERICK: I’d say don’t execute a merger just to say you did a merger. Make sure the numbers make sense, especially in today’s market. Not knowing where the economy is going along with the pandemic could put you in a rough spot if you’re not financially prepared for it. Make sure the number makes sense to your bottom line.
But in the end, all I can say is don’t be afraid. If it’s not the right time now, build and cultivate those relationships, so down the line you’re the person they come to when ready.
If you have questions related to the CENTURY 21 Brand and Franchising or how our team can help support you in the M&A process, please visit century21.com/about-us/franchise