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Field Guide to Real Estate Office Mergers

(Updated November 2013)

Merging with or acquiring another business is a significant undertaking that will leave no area of your business untouched. One must pursue a merger or acquisition with caution and proper due diligence. According to McKinsey & Company, “some 70 percent of mergers fail to achieve expected revenue synergies,” (Mergers and acquisitions: New McKinsey Research Challenges Conventional M&A Wisdom, Strategy & Leadership, 2004 Q). However, with the right set of circumstances—culture cohesion, solid leadership and management, flexible employees, deft market positioning, a copacetic economy—a merger or acquisition can be a sound decision. This field guide will assist you in enumerating the issues and considerations of a merger or acquisition.

(K. Stockert, Information & Web Content Specialist)


Quick Facts:

• 10% of REALTORS® worked for a firm that was bought or merged in the past two years.
• 28% of REALTORS® who worked for a firm that was bought or merged, 28% left voluntarily
• Of the REALTORS® who stayed on to work for a new consolidated firm, 76% say compensation remained the same, compared with 14% who say it increased.

Source: National Association of REALTORS® 2013 Member Profile


Mergers and Acquisitions: The Basics 

A Script for Ushering Change, (Weekly Book Scan, Mar. 2013).

July/August 2012: Commercial News Round Up (REALTOR® Magazine, July 2012).

What Happened to My Managing Broker? Mergers, Acquisitions and the Managing Broker (Chicago Agent Magazine, Jun. 4, 2012).

Real Estate Brokerage Research in the New Millennium (Journal of Real Estate Literature, 2011). Q

Mapping a Process for Successful Mergers (Nonprofit World, July/Aug. 2010). Q

Be a Masters of Mergers and Acquisitions (HRMagazine, June 2010).  Q


Real Estate M&A Activity

Merger Expands Howard Hanna’s Commercial Footprint, (Inman, Sept. 30, 2013).

Merger Creates New Coldwell Banker Franchise in Northern California, (Inman, Jun. 2013).

Nation’s Largest Homebuilder Expands (REALTOR® Magazine, Aug. 15, 2012).

Real Living, Prudential Franchise Sold (REALTOR® Magazine, Oct. 29, 2012).


Due Diligence

Due diligence refers to the process of reviewing a company for potential acquisition or merging. It can include in-depth review of a company's accounting and tax records, business plan, historical performance statistics, market strategy and position, office policies, physical space, IT infrastructure, human resources, and more.

What’s Your Agency Worth? (Best’s Review, Apr. 2012). Q

Mergers and Acquisition Transaction Costs: Who Gets the Benefit? (Business Entities, July/Aug. 2010).  Q

Mergers and Acquisitions: Finding the Perfect Suitor (REALTOR® Magazine, Sept. 2009).

6 Questions to Ask Before Swallowing a Competitor (REALTOR® Magazine, Apr. 2009).

Acquisitions: Casting for Competitors (REALTOR® Magazine, Sept. 2008).


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.

Converting a C Corporation into an LLC: Quantifying the Tax Costs and Benefits (Journal of Taxation, Aug. 2010).  Q

Forming an LLC (Wall Street Journal, Online Edition, Mar. 26, 2010). 

Forming an S Corporation (Wall Street Journal, Online Edition, Mar. 22, 2010). 

Forming a C Corporation (Wall Street Journal, Online Edition, Mar. 15, 2010). 

Forming a Partnership (Wall Street Journal, Online Edition, Mar. 8, 2010). 

Forming a Sole Proprietorship (Wall Street Journal, Online Edition, Mar. 1, 2010). 

Starting a Business (U.S. Small Business Administration).


Free Government Resources

Did you know 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.

Check out the SBA’s Learn About Business Law & Regulations topic page that is great for orienting yourself with important steps to take mitigate risk when forming or reforming a business. The Create 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 FTC Merger Best Practices topic page offers links to new releases, reports, and details on free workshops being offered at different locations across the United States. The Federal Trade Commission also offers a Frequently Asked Questions about Merger Consent Order Provisions web page.

The National Association of REALTORS® Council of Real Estate Brokerage Managers (CRB) offers courses on a variety of real estate brokerage topics. Visit the CRB website to learn about their course offerings.


Research on Your Own

To search for the most recent articles on this topic, login to NAR's ProQuest account and enter subject terms such as:

  • Acquisitions & mergers
    • Enter into ProQuest text box as SU (acquisitions & mergers)
  • Due diligence and Acquisitions & mergers
    • Enter into ProQuest text box as SU (due diligence) AND SU (acquisitions & mergers)

Information Savvy!

Many websites, such as Wikipedia, can be great resources to quickly get oriented on a subject before conducting more in depth research. However, anyone in the world can create and maintain a website or write a seemingly legitimate article and may, intentionally or unintentionally, publish false or “misinformation.” When reviewing information on the Internet, you should always consider the ABC’s:

  • Accuracy. Is the information accurate? Can you confirm the same information using other resources published by a different author or organization?
  • Author. Who composed the information? Can you easily identify the author and contact the author or website publisher?
  • Bias. What bias might the author or author organization have?
  • Credibility. What is the author’s or author organization’s credentials for publishing the information? What expertise, experience, or education does the author have in this area that makes him or her qualified to write on the subject matter?
  • Currency. When was the web page last updated? Is it possible the information might have changed since this web page was last published?
  • Critical eye. Remember to always use your discretion and critical eye to determine whether information you find on the web (or even in books and news sources!) is trustworthy. Putting websites to the ABC test will get you started in developing a strong critical eye.

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

Achieving Post-Merger Success (Adobe eReader)

Applied Mergers and Acquisitions Workbook (Adobe eReader)

Buying and Selling a Business (Kindle, Adobe eReader)

Charging Back Up the Hill (Adobe eReader)

Exiting Your Business, Protecting Your Wealth (Adobe eReader)

How to Increase the Value of Your Company (Adobe eReader and Kindle)

Merger and Acquisitions Basics (Adobe eReader)

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