One of the quickest ways for real estate brokerages to grow toward market dominance is through mergers and acquisitions. But how do the titans of the industry eye their next purchase, and what are some of the most important things that the company doing the acquiring or being acquired needs to know?
A panel of experts discussed some of the best practices of the mergers and acquisitions market during the final session of Broker Connect at Inman Connect in San Francisco on Wednesday.
It seems like obvious advice, but Joe Rand, the managing partner and general counsel of Better Homes and Gardens Real Estate said it’s important to not be a jerk.
“If you’re a jerk in the industry, nobody is going to want to come work for your company, and nobody wants to sell their company to you,” Rand said. “You have to be nice to people.”
Rand explained that simply, nobody is going to sell their company to someone they don’t like. You have to be in a position to maintain good relationships throughout your market.
“If the only time you have a conversation with this other broker is when you call them to see if they want to sell their company, then you don’t have a relationship with them,” Rand said. “You’re just cold calling them.”
One of the key parts of Rand’s strategy is to always be on the lookout and take every meeting. He said you want to be one of the calls another brokerage makes when they decide to sell.
“It is tragic if somebody in our marketplace sells their company, and we didn’t get to make a bid on it,” he said. “That to me is an absolute failure when that happens.”
Eddie Berenbaum, the president and co-owner of Century 21 Redwood Realty, said it’s important to really understand the financials associated with every investment. He said to look at broker metrics and export all of the brokerage’s production. Figure out the brokerage’s splits, then find out about any agreements the company has in place like the rent on its office.
“As you move on, get a non-disclosure agreement signed, and then take a look at what’s actually happening,” Berenbaum said.
Rich Green, the executive vice president of worldwide sales at Realogy, said there are also a number of things that a brokerage that’s about to be acquired needs to know before they sign any deal.
Specifically, the leaders should be aware of what their ongoing responsibilities will be once the transaction closes and if there are any roles with the acquiring company they should be eyeing.
“Many companies have become great because of their ability to attract great leaders through acquisitions,” Green said.