Mergers and acquisitions, as in so many American industries, are changing the face of real estate.
“Small companies like to join bigger ones, and larger companies are only too happy to expand into more markets by acquiring smaller ones,” says George Slusser, who heads up the Merger and Acquisition Division at real estate consulting and research firm WAV Group. “It’s been a busy time. I’ve seen more M&A activity in the last year or two than I’ve seen in my 40 years in the business.”
At this moment, notes Slusser, as the real estate market cools after years of pandemic-driven frenzy, a few of the firms who’ve had the greatest appetites for acquisition are taking a pause.
“The state of the market is always a factor,” he says.
Yet despite the current pause, and conflicting economic forecasts, the interest in M&As across the board today is strong, according to accounting giant KPMG.
The company’s June 2022 mid-year report shows nearly 80% of key business leaders surveyed say their appetite for making deals is as strong or stronger now than it was in 2021.
That’s an encouraging indicator for broker/owners who may be looking to grow their company, facilitate its next chapter or explore the idea of a sale as an exit strategy.
But when you’ve spent a career building a firm, you will want to feel confident that the deal you make is the best one you could have struck.
“Brokers sell their companies for a variety of reasons,” says Mark McLaughlin, an M&A advisor at California-based WAV Group and CEO of McLaughlin Ventures. “Many see it as a pathway to growth—and there are only two ways to grow a company. One is organically, through years of recruiting and opening new offices. The other is through a merger or acquisition, which can instantly expand your marketshare and your resources.”
McLaughlin speaks from experience. Before partnering with WAV Group in June 2022, he was CEO of San Francisco-based Pacific Union International Real Estate, which he purchased from GMAC Home Services in 2009 with sales of $2 billion, and nurtured to sales of over $14 billion before selling to Compass in 2018.
But growth is not the only motivation for exploring the sale of your company.
“Some brokers,” McLaughlin notes, “see it as a bridge to next steps in their careers or personal lives—or as a means to ensure their legacy in the absence of a practical succession plan.”
Whatever the reason, he explains, brokers should be clear about their desired outcome from the start, because the issue of company leadership or any change in management going forward will be an important factor during the negotiation and transition phases.
Whatever your motivation, he says, first steps begin with determining your firm’s true worth.