The other day I was surfing the net (that is code for avoiding the things that really need to get done) and ran across the new Honda Coupe website www.why-merge.com. I have to admit that I was a little curious due to the title alone. Of course the website is a great Gen Y marketing tool and had a great irreverent undertone. After clicking through a couple of pages I began to think about the application to real estate – especially in today’s market. Why merge? Interesting. Why would a company want to do that, not to mention – now?
What better time to concentrate on the subject at hand. We’re obviously in a market that has caused broker/owners to consider why the heck they are in this business. Others are realizing that there really is a reason why they are called: BROKE-ER.
It’s no secret that financial pressures are taking their toll on some organizations. Yet others are humming along still churning out single to double digit profits. Yes, their profits are down from historic highs, but through the proper financial planning they were prepared and are now surviving. Surviving in order to take advantage of this market by growing their operations. Fold-ins, acquisitions, mass-recruiting are all road signs of our industry, no matter where you’re located.
No matter how many times I’ve broached this subject in a consulting meeting with a brokerage owner, I typically get these same excuses:
1. No one is for sale.
2. No one will talk to me.
3. It takes too much money.
4. It won’t work in this market.
These are all myths that are unfounded and based upon a lack of knowledge of exactly how and exactly what to do in a merger/acquisition scenario. After all there is a great big unknown out there, sadly made larger than life by fear. Of all the mergers, acquisitions, fold-ins, buy-outs, exit strategies that I’ve been involved in or helped orchestrate as a consultant, I’ve only seen a handful require any substantial money upfront. No different than a seller carry-back mortgage, many brokerages are transferred under similar terms. Thereby providing a long-term income for the selling party. Of course, fold-ins typically require zero investment other than an override and attractive split for the broker/manager who is folding in their operation.
Reasons #1 and #2 above are easy to overcome. A couple of years ago I was consulting with a brokerage firm in the Ohio Valley. The owner was looking to grow her operation through recruiting alone and had never really thought about acquiring market share through an acquisition. After educating her on the merits of such a strategy, she gave me the old #1 and #2 and added a couple of other reasons why it wouldn’t work. I asked her to move forward in blind faith. Here’s what we did. First, write a letter to the offices that fit the acquisition profile: selling brokers, small Ma & Pa, rumored financial problems, agent unrest, tired management, etc. Let them know that you are excited about the prospects of the market and would love to entertain discussions about how we can accomplish more together than as individual companies. Go on to pay a compliment and let them know that you would welcome a conversation to explore opportunities to work together. Confidentiality assured, of course!
The Ohio Valley broker did just that the following week. She sent out a dozen letters in her small town – where no one would ever entertain selling out, and received 5 immediate responses that resulted in the acquisition of two local competitors. All as a result of a little 3 paragraph letter that took no more than 10 minutes to write. I guess some of the owners that gave me the excuses in the past were right. It really doesn’t work………if you don’t try it.
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