We hope to see you in Washington, D.C., for RISMedia’s CEO & Leadership Exchange on September 5-7. As a preview of the amazing content to be shared at the 35th annual gathering, I have summarized a recent webinar we all enjoyed on June 21.
Co-moderated by John Featherston, founder and CEO of RISMedia, and George Slusser, a partner at WAV Group, the panel discussion featured Larry Rideout, chairman and co-owner of Gibson Sotheby’s International Realty; Bess Freedman, CEO of Brown Harris Stevens; Hoby Hanna, CEO of Howard Hanna Real Estate Services, and me.
Conversation surrounded our industry’s current state as one with “headwinds” like we have experienced in many other cycles—most recently, the financial crisis of 2008 – 2009. Although the underlying macroeconomics are very different, the growth, expansion and M&A opportunities are very real.
Panelists shared unique growth opportunities about their firms’ bold advances in past and present cycles. Stories were shared with a spirit of “the time is now” to drive growth through geographic expansion and M&A.
Two common threads were the importance of preparation and culture. Preparation is optimizing your business to be an attractive buyer or seller. Engaging experienced legal, tax and business consultants, whether a buyer or a seller, will position your business to achieve peak performance. Culture is king/queen in successful growth by acquisition. The 1 + 1 = 3 analogy as well as the synergies and the momentum in a merger all come from a shared common culture and mutual trust amongst leadership teams.
Experiences were shared by panelists of being prepared, being bold and acquiring talent and not just business metrics as key ingredients of successful growth strategies. While small acquisitions or “tuck-ins” can be absorbed into a buyer’s existing infrastructure, larger acquisitions are dependent on “in-market leadership” either relocating buyer personnel or the established seller leadership.
The importance of operating at scale (size) was also discussed as a key business strategy. Getting to scale permits advantages to a brokerage business. Operating mortgage, escrow, title, insurance and property management business are key economic engines of a brokerage business that are only possible when operating at scale. Depending on your market dynamics, operating at scale means closing more than 3,000 trades a year.
The current state of mergers and acquisitions includes both buyers and sellers making concessions to achieve synergies together. Earn-outs are longer, sometimes five to seven years, to de-risk opportunities for buyers and increase seller economics over time. Valuations can include weighted averages of three, sometimes five years of performance. Earn-outs can have “collars” and “catch-ups” protecting the downside for a buyer and providing upside to a seller.
Leadership, culture, synergy and a prepared business all contribute to successful growth strategies.
Be bold, be confident and surround yourself with talent in your quest for growth.
For more information, visit https://www.WAVGroup.com.
Mark A. McLaughlin, president of McLaughlin Ventures III, acquired Pacific Union in 2009. In 2018, Compass acquired PUI at $14 billion in sales volume, where McLaughlin served as chief real estate strategist. Today, McLaughlin serves as a consultant focused on strategic planning, CEO advisory and mergers and acquisitions.
