Is Acquiring a Company The Next Step for Your Brokerage?

Part 1: Identifying the Right Market

Regardless of where you're at in your career as a real estate brokerage owner, the most savvy business people in this industry are always looking ahead to the next phase of their organization. That next phase may vary for each person-- opening up additional offices in their current area, expanding into a new region and in some cases acquiring a competing company in their market. But too often, broker/owners think acquiring a competing company in their marketplace is unattainable or improbable as a means of growth, so they dismiss the idea.

I recently lead our company through an acquisition that made us #1 in agent count in the Denver market. In fact, almost one-third of my time is spent evaluating merger and acquisition opportunities for corporate owned brokerages as well as collaborating with franchisees about accelerating growth in their markets.

When you dig in and start discovering the best and fastest way to grow your real estate brokerage, you might be surprised to find acquiring competing company in your marketplace is far more attainable than you think.

This is Part 1 of a 3 part series. Over the course of the next few weeks, we will dive into the 'nitty gritty' of how you will identify your readiness when it comes to acquiring or merging your company with another in the marketplace. We'll discuss important acquisition components like:

• Knowing if you're financially ready
• Planning for future growth
• Valuations and making an offer
• Negotiations
• Transitions

Many factors need to be considered and given proper weight. In this initial post, we'll dive into the first step in the process:

Identifying the right market.  

Over the years I've had dozens of broker/owners tell me they need to grow into a new market, simply because agents tell them to. Now, I'm not discounting that some agents may be in tune enough with the market to know this information, but you definitely want to do your own homework as well. Several factors can indicate if a market area is ripe for your company growth.

You should consider/investigate things like:

• Year-over-year sales growth: Is the market seeing overall housing growth or have sales slowed?
• Agent growth: Are new agents flocking to this new market territory and is there a hefty amount of agent chatter about the area?
• Distance from your existing branch office location(s): Is it far enough away, so it won't compete with your existing office location(s)?
• Availability of existing competition to acquire: Is there an existing competitor you might want to acquire within the new market area(s) you've identified as upwardly mobile?

Once you've identified growth conditions in the areas surrounding your existing market share, you might just find that there are some areas that make more sense than others for your company. At this point, you're also operating off data and numbers instead of anecdotal feedback alone.

Now that you’re armed with numbers and information, you're ready for the next steps of diving into an acquisition opportunity for your company.

Stay tuned for Part 2 of the series about finding the right deal. If you have questions or are interested in uncovering data about your market, feel free to contact me directly at bbrooks@hsmove.com.