Trulia set to acquire Market Leader for $355 million

Lead generation, customer relationship management tools to be integrated

Real estate marketplace Trulia announced today that it has entered into a definitive agreement to acquire real estate marketing and technology company Market Leader Inc. for $355 million, fleshing out its software offering to agents in one swoop.

Market Leader provides customer relationship management software to real estate professionals. Trulia rivals Zillow and Realtor.com offer similar tools to help agents get the most out of leads generated by the sites, which they have developed internally.

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Trulia said the acquisition will bring total premium subscribers to 46,000 —  more than any other real estate website — and eventually result in a “combined platform that creates value for the entire real estate market, from consumers to brokerages, agents and franchisors.”

Under the terms of the merger agreement — approved unanimously by Trulia and Market Leader’s boards of directors — Market Leader shareholders would receive $6 in cash and 0.1553 shares of Trulia’s common stock for each share of Market Leader common stock —  an 18 percent premium to Market Leader’s closing share price of $9.61 on Tuesday.

The merger, expected to be completed during the third quarter, must still be approved by Market Leader shareholders. A New York-based law firm, Levi & Korsinsky, today announced it was launching an investigation into whether Market Leader’s board of directors “breached their fiduciary duties to stockholders by failing to adequately shop the company before agreeing to enter into the transaction, and whether Trulia is underpaying for Market Leader stock, thus unlawfully harming Market Leader shareholders.”

The Briscoe Law Firm and Powers Taylor made a similar announcement. Large mergers often lead to litigation or threats of litigation by shareholders, which in many cases are resolved.

Market Leader posted a $7.78 million loss on $45 million in revenue in 2012, and had an accumulated deficit of $46.7 million through Dec. 31, according to its most recent annual report.

Assuming the merger goes through, Trulia and Market Leader products will be integrated over time, giving agents “unmatched data, combined with leading edge tools for working with consumers to help them find the home of their dreams,” Trulia said. “Agents that use the combined platform will realize that every lead will become more valuable and the agent will have greater visibility into the value of the lead.”

Trulia CEO Pete Flint said in a statement that the acquisition “will create unprecedented value for our customer base while also accelerating our growth. Marrying our 31 million — and increasing — monthly unique visitors with Market Leader’s robust offerings and extensive partnerships with leading real estate franchisors and brokerages creates a company that will play an even more integral role driving value to the real estate industry.”

The combined companies “will help brokerages and franchisors enhance the productivity of their agents by offering them the most comprehensive, end-to-end solution via web and mobile devices. Our combined platform also will enable agents to increase their follow-up capabilities, engagement with clients and the return on investment on their leads.”

Market Leader President and CEO Ian Morris said Market Leader and Trulia “have highly complimentary offerings and cultures and we believe this combination will be a big win for our customers, our employees, and our shareholders. The Market Leader team and I are excited to join Trulia and jointly pursue the many growth opportunities before us.”

Market Leader provides CRM tools to a number of real estate industry clients, including franchising giants Keller Williams Realty, Century 21 Real Estate and Better Homes and Gardens Real Estate.

“We’re tremendously excited about Market Leader’s relationships with franchisors,” Flint told Inman News. “And we’re also sensitive about them.”

To ensure the integrity of Market Leader’s current relationships, Market Leader will operate as a separate division with separate data within Trulia, he said. It will also maintain Market Leader’s current headquarters in Kirkland, Wash., just across Lake Washington from Zillow’s Seattle home.

About a fifth of Market Leader’s agent customers — 23,000 — purchase premium services from the company. Minus about a 20 percent overlap with agents who currently advertise with Trulia, the Market Leader acquisition will grow Trulia’s agent subscriber base from its current total of 28,000 to 46,000, the companies said.

Known as HouseValues before rebranding in 2008, Market Leader transitioned from being primarily a seller of leads generated by sites like HouseValues.com into a provider of “software as a service” marketing tools and customized websites for agents and brokers.

In September, 2011, Market Leader turned its attention back to beefing up its lead generation capabilities, acquiring listing portal RealEstate.com from Tree.com for $8.25 million. That website had been operated by a real estate brokerage, Tree subsidiary RealEstate.com, Realtors.

Last August, Market Leader announced that it had agreements with multiple listing services in more than 150 markets that were providing Internet Data Exchange (IDX) feeds containing information on about 1.6 million listings to the site. Currently, RealEstate.com gets IDX listing feeds from 123 MLSs, according to its website.

The appearance of IDX listings on RealEstate.com raised eyebrows of some brokers. While brokers can choose whether or not to send their listings to national portals like Zillow, Trulia and Realtor.com, MLSs provide IDX feeds to all participating brokerages. The only option for brokers who don’t want their listings to appear on IDX websites is to pull out of the system altogether — meaning they would not be able to display listings represented by other brokers in their market on their own websites.

Morris said at the time that Market Leader retained the brokerage licenses held by RealEstate.com, Realtors,  but was not providing brokerage services. Market Leader is a licensed brokerage and MLS member in each of the markets where it is getting an IDX feed, he said.

Currently, RealEstate.com has brokerage licenses in 43 U.S. states and Washington, D.C., Inman News has found.

Now, Trulia’s acquisition of Market Leader has renewed the debate over the publication of IDX listings on RealEstate.com.

“It’s a smart move for Trulia, but raises a lot of questions with regard to (Market Leader’s) ownership of RealEstate.com,” said Marc Davison, a consultant with real estate marketing and design firm 1000watt.

Brian Larson, an attorney and consultant with Larson/Sobotka Business Advisors LLC who often advises MLSs, said RealEstate.com “challenges some assumptions about how IDX should work, and it’s not consistent with some conceptions of how IDX does work.”

Acknowledging the debate, Flint said Trulia “has absolutely no intentions of becoming a brokerage.”

Flint said the Market Leader acquisition is about “technology and customer relationships,” and that the company has “no intention to operate (RealEstate.com) it in the same way it’s being operated. This acquisition is not about brokerage licenses, but all about software and tools that will help real estate agents be more successful.”

Larson said the acquisition “opens up other doors in the real estate vertical for Trulia” and puts them “overtly in the CRM and back-office space.”

The acquisition, he said, “could be to Trulia what Diverse Solutions is to Zillow,” referring to the listing portal’s 2011 acquisition of the Irvine, Calif.-based company, a provider of listings content that powers property searches for real estate agents’ websites and mobile platforms.

“This acquisition allows Trulia to catch up with Zillow and (Realtor.com operator Move Inc.), and I suppose, they would argue, actually surpass them,” said Brian Boero, co-founder of 1000watt.

Editor’s note: This story was written by Inman News staff writers Paul Hagey, Teke Wiggin and Matt Carter, with updates after initial publication. Connect with people and companies mentioned in this story: Pete Flint, Ian Morris, Trulia, Market Leader, Levi & Korsinsky, Marc Davison, Brian Larson, Brian Boero.

What do you think this acquisition means for agents and the industry as a whole? Leave a comment to continue the discussion.

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