NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
Quick Facts:
- Twenty one percent of firms reported that the number of mergers and acquisitions for the firm has remained the same from 2017to 2019 to 2020 to 2022.
Source: 2023 National Association of REALTORS® Profile of Real Estate Firms
- Eight percent of REALTORS® worked for a firm that was bought or merged in the past two years.
- Of the REALTORS® who worked for a firm that was bought or merged, 29% left voluntarily.
- Of the REALTORS® who stayed on to work for a new consolidated firm, 80% say compensation remained the same, compared with 9% who say it increased.
Source: 2024 National Association of REALTORS® Member Profile
Mergers and Acquisitions: The Basics
Mergers and Acquisitions (M&A): Types, Structures, Valuations (Investopedia, Jul. 12, 2024)
- Mergers and acquisitions (M&A) refers to the ways businesses, or their assets, are consolidated or combined.
- In an acquisition, one company purchases another outright.
- A merger is the combination of two firms, which subsequently form a new legal entity under the banner of one corporate name.
- Mergers and acquisitions require the valuation of a company or its assets to decide how much to pay for those assets.
- M&A can be financed through a combination of debt, cash, and stock.
Why Brokerage Mergers Are About Buying ‘Hope’ (Real Estate News, Feb. 4, 2024)
Unlike other businesses where an acquisition may include inventory, equipment or other tangible assets, in real estate, brokerage investors are effectively buying the talent and sales pipeline of agents and teams. In other words, "you're buying the hope of future production," Kolding said. This creates a unique risk — but it can also bring unique rewards.
A Recipe for Brokerage Success: Accountability, Systems and Mergers (REALTOR® Magazine, Jun. 21, 2023)
For single offices who are feeling the pressure of a changing market coupled with the fast-paced evolution of technology, merging with a larger, multi-office brokerage that has structure and systems built in can make a difference in agent retention and profitability. It relieves some of the financial and administrative pressure off brokers, making them more available for clients and agents.
Is a Merger Right for You? (National Association of REALTORS® AExperience, Apr. 26, 2023)
“Two associations merging can often be a sensible idea for the members of both associations. Pooling resources through a merger can make for a larger and stronger association that serves its membership more easily and efficiently. When starting those discussions, the road ahead can seem uncertain, and it can be difficult to figure out where to begin and what steps to take. Luckily, the National Association of REALTORS® has several resources available to help with the process.”
Real Estate Merger and Acquisition Activity
Real Estate Industry Shifts with Mergers and Acquisitions (Spokane Journal of Business, Jul. 18, 2024)
The Legacy Group LLC, a real estate team under the umbrella of Keller Williams Realty Coeur d'Alene, sought expansion through its acquisition of Spokane-based Top Agent Team LLC, says John Graham, CEO and owner of the Legacy Group. Top Agent was also under the umbrella of Keller Williams Realty.
The transaction, announced in June, will enable Legacy Group to expand its services to customers across the Tri-Cities, Washington, and the Coeur d’Alene region. Graham says there are no plans to change Top Agent’s name, as the brand holds value in name recognition, but will likely have the addendum “Powered by The Legacy Group.”
Merger Brings Together Pair of Greenville Real Estate Firms (GSA Business Report, Jun. 4, 2024)
“We are thrilled by the opportunity this merger brings to our community,” Edgerton said in the release. “KDS Caine represents two great, locally owned and operated companies that have decided to join forces, leveraging each other’s complementary strengths, to better serve the Upstate’s commercial market. We are totally focused on the future of our vibrant and growing community and those who want to invest in it.”
Fort Worth-Based Stryve Realty and United Real Estate | DFW Properties Join Forces (Fort Worth Inc., Jun. 4, 2024)
This is the second merger in 12 months for United | DFW Properties. In October, it merged with Fort Worth-based Insight Realty following its October 2023 merger with Insight Realty, adding roughly 100 agents to the agency. Stryve Realty's 60 agents and existing Fort Worth office expand United's service footprint and support services for agents and consumers.
A Look at Today’s Mergers and Acquisitions Environment (RIS Media, Aug. 21, 2023)
“The current state of mergers and acquisitions includes both buyers and sellers making concessions to achieve synergies together. Earn-outs are longer, sometimes five to seven years, to de-risk opportunities for buyers and increase seller economics over time. Valuations can include weighted averages of three, sometimes five years of performance. Earn-outs can have “collars” and “catch-ups” protecting the downside for a buyer and providing upside to a seller.”
The World of Real Estate M&A Has Changed for Buyers (HousingWire, Jul. 17, 2023)
“Buyers aren’t willing to value companies at that level in this market, nor should they. I said several months ago that sellers have unfortunately missed the top of the market and that moving forward, buyers will be presenting offers with a far less fanciful multiple. In fact, several panelists weren’t quoting over a three multiple. Now, every deal has its own quirks but overall, the high multiples are gone.”
CBRE Explores Large Acquisitions That Could Reshape the World’s Largest Brokerage (CoStar, Apr. 27, 2023)
“The company is the first brokerage to report its first-quarter earnings and the results provide an indication of what other major publicly traded brokerages could report in the coming weeks. CBRE said its first-quarter revenue rose 1% to $7.4 billion from the year-earlier quarter while its earnings exceeded analyst expectations, though still falling to $116.9 million from $392.3 million. The stock closed up 8.9% Thursday.”
Due Diligence
The Power of Due Diligence in Mergers and Acquisitions (Beckemeier LeMoine, Sep. 22, 2024)
Financial due diligence is crucial because it provides a clear picture of the target company’s financial health. Buyers risk inheriting undisclosed liabilities or overestimating future cash flows without this clarity. This thorough review ensures that buyers understand the financial commitments they are taking on and helps prevent overpaying for the target company. Ultimately, financial due diligence ensures that the numbers add up and the deal makes economic sense.
Mergers and Acquisitions: What Business Owners Need to Know Before Taking the Leap (Steinberg Law, Mar. 24, 2024)
Due diligence for past income tax liabilities and tax carry forwards can include a review of IRS Form 5500 for 401(k) plans, government audits, tax sharing and transfer pricing agreements, credit carryforwards, net operating losses, notices or correspondence from any federal, state, local, or foreign tax authority, and all tax returns filed in the last five years. You will also want a lawyer to review intellectual property such as domain names, copyrights, patents, trade secrets, trademarks, IP litigation and claims, licenses, licensing agreements, and liens on intellectual property.
Comprehensive M&A Due Diligence Checklist for Public and Private Deals (Thomson Reuters, Apr. 10, 2023)
“You’ve been assigned a major task—your firm has put you in charge of conducting due diligence for an upcoming merger. Your work will be vital to the deal’s success, as well as to your firm’s relationship with its client. Digging into a potential acquisition and spotting any red flags in the company’s operations is an essential job for a lawyer. However, the amount of work that due diligence entails can make a junior attorney unsure about where to begin. The process may seem overwhelming. First things first: you need an M&A due diligence checklist.”
Business Formation: Choose a Structure
C Corporation, S Corporation, Sole Proprietorship, Partnership, or Limited Liability Company (LLC)? What are the tax, liability, and capital requirement implications of incorporating versus forming an LLC? The resources below offer a basic foundation in business formation considerations.
5 Common Business Structures and the Advantages of Each (Indeed, Aug. 15, 2024)
In a business partnership, two or more people own and operate the business. A partnership is one of the simplest business structures for multi-owner companies or professional groups. There are two types of partnerships: general and limited. In a general partnership, partners have equal roles in owning and operating the company, along with its debts or financial obligations. Some people refer to this business structure as a limited liability partnership (LLP).
Choose a Business Structure (United States Small Business Administration, Aug. 8, 2024)
“Designations like S corp and nonprofit aren't strictly business structures — they can also be understood as a tax status. It's possible for an LLC to be taxed as a C corp, S corp, or a nonprofit. These arrangements are far less common and can be more difficult to set up. If you're considering one of these non-standard structures, you should speak with a business counselor or an attorney to help you decide.”
Free Government Resources
Did you know that the U.S. Small Business Administration (SBA) provides a robust offering of free online and in-person courses, workshops, sample documents, monthly web chats, and FAQs to assist you in your business endeavor? It's true. Check out the SBA's website to discover offerings relevant to your needs.
The SBA’s Stay Legally Compliant topic page is great for orienting yourself with important steps to take mitigate risk when forming or reforming a business. The Write Your Business Plan topic page offers links to a diversity of materials, including free educational courses, video tutorials, checklists, and more.
The U.S. Federal Trade Commission's Guide to Antitrust Laws includes a section concerning Mergers. The Federal Trade Commission also maintains a Frequently Asked Questions about Merger Consent Order Provisions page
The National Association of REALTORS®’ Real Estate Business Institute (REBI – formerly the Council of Real Estate Brokerage Managers) offers courses on a variety of real estate brokerage topics. Visit the REBI website to learn about their credentials and course offerings
eBooks & Other Resources
eBooks.realtor.org
The following eBooks and digital audiobooks are available to NAR members:
Achieving Post-Merger Success (eBook)
Applied Mergers and Acquisitions Workbook (eBook)
Buying and Selling a Business (eBook)
Charging Back Up the Hill (eBook)
Exiting Your Business, Protecting Your Wealth (eBook)
How to Increase the Value of Your Company (eBook)
Merger and Acquisitions Basics (eBook)
Have an idea for a real estate topic? Send us your suggestions.
The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.
Share