5 STEPS TO MUTUALLY BENEFICIAL ACQUISITION

We will help you achieve a win-win transaction.

Real estate brokerage can be a challenging business that demands long hours, sacrifice, and significant financial investment. To maximize the equity in your business and create a mutually beneficial acquisition, it is essential to follow the right steps. By combining expenses and resources with another brokerage, you can leverage synergies to achieve better results and ensure that your hard work pays off.

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The Challenges of Running a Real Estate Brokerage

Real estate brokers work hard for their money. Many have taken out first, second and third mortgages over the years just to keep themselves afloat during hard times and to grow their brokerages when banks wouldn’t fund that growth. The stress that goes with business ownership takes its toll on relationships and requires lots of late nights and weekends of work. The hope is that the investment will be worth it.

Maximizing Equity in Your Real Estate Brokerage Investment

On the one hand, you want to ensure when you exit your real estate brokerage investment, you maximize the equity in your business to provide compensation for all the sacrifices you made along the way. On the other, you may still be in growth mode, having seen the fruits of your sacrifices. If that is your situation, these tips are for you.

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A Faster Path to Growth

There are lots of brokers retiring given that many are in their 60s, 70s and 80s and a few are even in their 90s. Buying a brokerage is a much faster method of growth than attracting new agents one at a time. There also should be synergy in combining expenses between your existing brokerage and the one you are buying. The below are five steps to creating mutually beneficial acquisition.

Growing Your Real Estate Brokerage through Strategic Acquisitions: 5 Steps for Success

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1-Target List

To begin, you should make a target list. Look at your geographic location and determine what brokerages would be a good fit with yours. The fit is the first consideration because you want to buy someone who is compatible with your culture.

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2-Make Contact

Once you have the Target List, reach out to each of them and invite them to coffee or lunch. Your objective is not to pitch themthat first lunch on selling you their brokerage, but in beginning a relationship with them given your common business interests.Over time, you can determine whether they might be interested in selling their brokerages. Your objective is the beginnings of a relationship.

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3-Arrange Financing

Thirdly, you should chat with the people who finance your business, perhaps including your banker, your investment advisor, your family, your friends and your private sources of funds, all with a view to understanding what you can afford to pay for a new brokerage both up front and over time.

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4-Consider Capacity

Fourth, you should also consider how many more agents you can handle with your current structure. There is a tipping point where an acquisition becomes too large to handle

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5-Hire an Advisor

Once the target is acquired and you have a sense of what you can afford, you should hire an advisor adept at navigating thevaluation, mergers and acquisition landscape involved in buying a brokerage. An expert advisor will save you time and moneyin the process. They will also help you value the acquisition target; prepare letter of intent and deal terms; facilitate and movethrough due diligence; help with attorney and accountant agreements; and close the deal.

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A Mutually Beneficial Acquisition

The benefits of purchasing an existing brokerage far outweigh the painstaking time it takes to add agents one or two at a time. If you find a compatible culture and have a good relationship with the seller, you should be able to create synergies between the old and the new. Your objective is to ensure a successful business transition for both of you. You are truly looking for WIN-WIN, because a mutually beneficial acquisition makes all the sacrifices along the way worth it.

Frequently Asked Questions

What is the typical multiple used for valuing brokerages?

Typically the multiple is anywhere from 2 to 4 times Earnings before Interest, Depreciation, Taxes and Amortization, although the multiple will be influenced by a number of different factors.

What factors make a brokerage more valuable?

There are numerous factors that influence the value of a brokerage:

1. deal structure (the more money up front, the less the multiple);

2. geographic location of brokerage (bigger typically means higher value);

3. size of brokerage (again, bigger typically means higher multiple);

4. specialties (a brokerage with a specialty, if lucrative, typically means higher multiple);

5. gross margin per agent (the higher, the higher the value);6. agent tenure, attrition rates and attraction rates (the longer agents stay with you, the higher the value);

7. broker’s status within industry and within town/city (the higher the status, the higher the value).

What is the sales process?

Obtain a valuation of your business to determine what it is worth;
Find a prospective buyer;
Enter into a Letter of Intent and Deal
Terms with the buyer;
Have your attorney and accountant work together to prepare legal documents;
Roll into due diligence;
Close the deal.

Where do I find a prospective buyer?

Your competitors are typically your best buyer;
Your children;
Your motivated agents;
Large real estate companies looking to buy brokerages;
Private venture capital companies; and
Local business people in your community.

How do I start?

The easiest way to begin is to schedule a free 45-minute call with one of our Mergers and Acquisitions experts.

Client Testimonials

"Over the last eighteen months, BVMA has provided their expertise to lead the addition of 11 brokerages and 267 agents."

Rob Lyszczarz

Broker/Owner, RE/MAX Select Group, New Jersey, Virginia, Florida

"Over the past seven years, we have grown our brokerage from five agents to 100 agents. Completing Mergers and Acquisitions with BVMA was a key part of this strategy, and we continue to execute and acquire."

Larry Schottenstein

Broker/Owner, RE/MAX Revealty, Columbus, Ohio

"Over the last twenty years, the professionals at BVMA have helped me execute multiple acquisitions successfully resulting in the addition of hundreds of agents to my company."

Gabe Bianchi

Broker/Owner, RE/MAX Premier, Vaughan, Ontario