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- Twenty one percent of firms reported that the number of mergers and acquisitions for the firm has remained the same from 2011 to 2015 to 2016 to 2020.
Source: 2021 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, 25% left voluntarily.
- Of the REALTORS® who stayed on to work for a new consolidated firm, 76% say compensation remained the same, compared with 12% who say it increased.
Source: 2022 National Association of REALTORS® Member Profile
Mergers and Acquisitions: The Basics
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.”
Mergers and Acquisitions (M&A): Types, Structures, Valuations (Investopedia, Mar. 25, 2023)
“Mergers and acquisitions (M&A) is a general term that describes the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management acquisitions.”
A Merger & Acquisition Leader’s Playbook for Success Where 83% Fail (Forbes, May 17, 2022)
“Mergers and acquisitions never unfold in a straight line. This is why successful leaders of pull from the seven different playbooks that make up the merger and acquisition leader’s playbook in different orders in different situations: strategic, commercial, operating, financial, governance, organizational, and change management.”
What is an Acquisition? (The Balance, Apr. 17, 2022)
Often, acquisitions are an agreed upon takeover in which the sale of a business is desirable for both companies involved. However, takeovers do occur – these are often known as hostile takeovers. The shares in the business being purchased are often bought for more than their current market value, and can be purchased with cash, stock options, or a leveraged buyout.
Real Estate Merger and Acquisition Activity
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.”
The Importance of Due Diligence in M&A Transactions (Foley & Lardner LLP, Aug. 29, 2023)
Due diligence is an important step in any merger and acquisition and is especially helpful in risk management. Due diligence during mergers and acquisitions can take on many forms; financial, accounting, and tax due diligence, legal due diligence, operational due diligence, technical due diligence, customer due diligence, and team due diligence.
How to Conduct Real Estate Due Diligence During M&A (+ Checklist) (DealRoom, Jul. 13, 2023)
Due diligence for real estate mergers and acquisitions includes financial due diligence, legal due diligence, property and land due diligence, and economic due diligence. Construction trends, rental trends, local large business trends, and tax breaks are also things to be considered. Investigating from said angles will improve an investors chances of avoiding illiquidity and guaranteeing that the property they are eyeing is fit for purpose.
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.
Choose a Business Structure (United States Small Business Administration, May 19, 2023)
“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.”
How to Start a Corporation (The Balance, Sep. 13, 2022)
When starting a business, there are seven basic steps you need to follow; choosing a corporate name and address, selecting a state to incorporate in, selecting a corporation type, determining company directors, choosing your share type, obtaining your certificate for corporation, and processing and filing the incorporation.
Understanding S Corporations (Investopedia, Jul. 16, 2022)
“S Corporation is a variation of a corporation within Subchapter S of Chapter 1 of the Internal Revenue Code. Essentially, an S corp is any business that chooses to pass corporate income, losses, deductions, and credit through shareholders for federal tax purposes, with the benefit of limited liability and relief from “double taxation.”
Partnership vs. LLC: What's The Difference? (The Balance, Jun. 7, 2021)
“A limited liability company (LLC) is a type of business legal entity that combines the liability protection of a corporation with the operations of a partnership. An LLC can have one or more owners, called members. Each member has a percentage of the equity (ownership) of the business.”
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
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.
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