As a broker/owner, my main mission is to consistently bring more business and opportunities to my agents so that they can build a business that will sustain the ever-changing market. That means I am always scanning the horizon for strategic relationships through mergers and acquisitions.
Are we looking in-market or out-of-market?
At the highest level, we look at either in-market or out-of-market opportunities. In-market relationships often present tremendous opportunities to create financial efficiencies by eliminating overlap. But there needs to be a cultural fit, most importantly at the leadership level. We can save all the money we want, but if the leaders are not aligned, the merged organization will not be successful.
Out-of-market opportunities present different considerations. Buying a company and its brick-and-mortar location is a fast and efficient way to increase agent count. Again, leadership is important: do the existing leaders have a strong following to support the transition and minimize agent breakage.
Here are some other considerations for partnering with another brokerage:
Is there a scalability ceiling?
Company size is another consideration when evaluating a strategic relationship. In my experience, brokers who run companies with 10 to 40 agents spend a lot of time managing people and the business, but don’t have enough capital to hire staff to support scale. These people are often super-successful salespeople who thought the next logical step in their career was to open a brokerage.
Oftentimes, running a brokerage is not their strength. Creating a strategic relationship that can allow them to keep their company intact while returning to their roots as a salesperson can be a perfect solution.
Are our models compatible?
One of the biggest things to manage in any merger or acquisition is agent breakage. Limiting change can go a long way in keeping agents, which is why I spend a lot of time discussing fee structures and compensation plans.
Do we need to grandfather in existing agents? Can we demonstrate enough value for any new fees we plan to assess? Will agents be comfortable working in a smaller space or completely virtually?
Is it a win-win?
I always strive to form positive strategic relationships. Whether a broker is looking for an exit plan, wants to relinquish leadership responsibilities or wants to preserve the company’s legacy, I am sensitive to the broker’s needs as well as my own. I typically don’t make a lot of noise around promoting an M&A because I think it is disruptive. I focus attention on the benefits of the relationship: it’s like status quo but better.
As we contend with a post-pandemic real estate market with potentially choppy economic seas ahead, broker/owners may be looking to sell, merge or roll in for a variety of reasons. The nature of the resulting relationship can take many forms but what doesn’t change is that we are constantly pursuing opportunities to support long-term growth and success for all involved.
Jeff Knipe is president and founder of Knipe Realty ERA Powered in Portland, Oregon.