Above, from left: Victor Lund, Debra Beagle, Chris Raveis, Rick Haase, Amy Lessinger, Jason Waugh, Mark McLaughlin. Photo by AJ Canaria.
As the market rebounds, new opportunities for growth are emerging—and savvy brokers are doubling down to lead the charge when it comes to shifting their strategies toward company expansion in order to grow their footprint and keep pace with the ever-evolving landscape.
While growth in a real estate brokerage is ultimately driven by ambition, planning and hard work, leaders in the M&A space came together during RISMedia’s 36th Annual CEO & Leadership Exchange last month to share their tried-and-true growth strategies.
The special Power Hour panel, titled “M&A Strategies in an Unpredictable Market” was moderated by Victor Lund, managing partner of the WAV Group. Panelists included Mark McLaughlin, president of McLaughlin Ventures III and interim president of brokerage operations/chief real estate strategist at Compass; Rick Haase, president, United Real Estate; Chris Raveis, president of Residential Sales/co-president of William Raveis, Inc., William Raveis Real Estate; Debra Beagle, CEO/managing broker/owner of The Ashton Real Estate Group with RE/MAX Advantage; Jason Waugh, president, Coldwell Banker Affiliates; and Amy Lessinger, president, REMAX, LLC.
Lund invited his panelists to discuss how they’re growing profitability within their business by sharing their unique “center of excellence” with the audience.
Growing through teams
Beagle kicked off the conversation by discussing her brokerage’s success in Nashville, emphasizing the importance of integrating smaller teams and brokerages by offering extensive support and resources.
With 200 agents today (growing from nearly 20 agents back in 2012), Beagle noted that within the last 90 days alone, they’ve brought 18 agents in (or back into) the brokerage.
“If you have the opportunity, there are a lot of teams that went out on their own back in 2020, 2021 and early 2022,” she explained. “They think they want to go and start their own brokerage, but they don’t really have an understanding of the business and all that it entails. They’re seeking stability and profitability, so the opportunity right now is looking in the markets—and if you’re overseeing multiple brokerages—and talking to the broker/owners and looking at their market for those small, productive teams or brokerages that just don’t have the support and resources.”
While the process reflects more of a merger than an acquisition, according to Beagle, it’s typically a 90-day transition.
“We’re not actually buying that brokerage and bringing it in. We’re offering everything we have available to that smaller brokerage and then making the transition very seamless,” said Beagle, who points to ongoing training and in-house marketing as two key pieces of the puzzle.
However, it doesn’t end there.
“We’re giving them marketing credits, and we aren’t charging them any fees for the first 90 days. We’re offering all of their branding under our brokerage model, and we also generate leads at the brokerage level, so this is an opportunity to save money coming over,” she added—all of which is encouraging people to pick up the phone and reach out.
“It’s our brand presence, our resources, our training and the stability, which is what they want right now,” said Beagle. “A lot of (the teams) think that it’s easier out on their own, and they’re finding that when times get tough, being part of a brand is much better.”
Growing through opening offices
Entering the family real estate business back in 1993, Raveis worked as an agent right off the bat—a role he held for several years before leaving to pursue commercial real estate. Eventually rejoining the family business in 2003, and tasked with growing the company outside of its home state of Connecticut, Raveis had to figure out how to open offices from scratch.
“My first thought was, ‘Well, we’ll just hire a bunch of recruiters, and we’ll let them go to work,’” explained Raveis. “But I found out pretty quickly that (wasn’t) going to work.”
Breaking down the strategy he’s come to depend on through years of experience, Raveis shared a few of the key elements that have allowed the firm to not only build offices from the ground up—but to do so profitably.
1. Do your research. “Make sure you look at your markets,” said Raveis, “and go into deep markets so that if you stumble at first, you’ve got a longer runway.”
While opportunities have dropped into his lap along the way, Raveis urged attendees to be careful in these situations.
“As you get bigger and more well-known, people are going to come to you with an opportunity. If it’s not according to your game plan where you were targeting, you’ve got to really be very careful around that.”
2. Get local. Raveis emphasized the importance of drilling down into local dynamics and the research—underscoring the need to get local.
“You really have to dig in,” said Raveis. “If you don’t have somebody really understanding what’s going on—who’s who, what manager is a good manager versus bad, top agents, personalities, all that stuff—then (they’re) going to be more prone to make mistakes…I’ve seen so many companies that are cheering going into a market, and they hire the most successful agent that no one wants to work with, and they have a one-agent office. So you really have to get local. If you’re hiring somebody to do this, just make sure that’s part of their task.”
3. Hire the right people. According to Raveis, bringing the right people into the mix doesn’t just include the agents. It also extends to the manager and the support staff (and everyone in between).
“If you have a startup office, it’s a little (bit of an) anxious time at the beginning,” he said. “Hopefully you have critical mass, but if you’re less than 10 agents, you’re starting a new office, (and) they’re all over you about what’s going to happen next. And if you don’t have a manager and a staff that has (a) real strong backbone, it could really crush that, and you’re going to be having to spend a lot of time in that branch as well.”
4. Establish office culture early. “In a startup environment, it’s about team collaboration,” explained Raveis. “It’s about everybody together looking at the new vision of what they’re going to be part of growing with you.”
To that end, Raveis expressed the importance of creating an office code of conduct to establish what’s tolerated and what’s not. “If you’re expanding rapidly, you’re not going to be perfect, but you can always go back to, ‘Hey, this is what we set up for the office, this person’s working against it,’ and you can have conversations with that.”
Growing within your model
For Haase, mergers and acquisitions, organic growth and franchise development have played a large part in United Real Estate’s growth from 5,000 agents just four and a half years ago to an agent roster numbering 24,000 today.
“I think it’s a little bit paradoxical, as you do not have to do M&A with like-modeled companies,” said Haase, who went on to explain that they have brought over some of the largest traditional real estate companies and have helped them either transform into the high-cashflow-to-agent model—or have let them run how they had been previously.
One of the fastest-growing models in real estate today, Haase points to three mechanisms that have set the stage for the firm’s rapid growth: having a strong ground game, having systems in place that principal brokers can use (whether they’re a franchise or company-owned)…and using those systems intensely.
“To have a good M&A game, you have to have a strong ground game. That puts pressure on competitive brokerages, which causes you to hit their radar. When you hit their radar and agents start talking about it, it gives agents the idea that maybe we are stronger together.”
From there, Haase noted that the next step involves growing the franchise network.
“Now, growing it means, again, a little bit of a misnomer. It’s not growing the number, it’s helping the ones you do have grow,” he said. “And if you do that, that’s exciting and very attractive to the rest of the brokerage community that’s out there interacting with them.”
With a strong M&A process in place, Haase explained that it all begins with what he calls the “gemstone dig,”—where everybody at a certain level and above is responsible for finding those brokers that are true gems. Those well-run companies with an incredible culture.
The fact that they don’t break what they’ve bought, however, is what Haase pointed to as the most important part of their M&A program.
“When a company acquires another company and less than a year later, there’s a billion and a half dollars worth of attrition in that company in sales volume, you know something wasn’t right,” said Haase, who highlighted the company’s proficiency and skill in creating the right transaction structure that gives the company being brought in their hopes and dreams.
Growing businesses within a network
Taking a strategic approach to determining who in the marketplace wants to grow (and who’s looking for succession both inside and outside the network), Lessinger pointed to the myriad opportunities available today.
“I think the big thing with conversions, mergers and acquisitions is what we’ve seen is the climate has not changed in the last few years. If anything, it’s ramping up even more,” she said.
“Everybody’s heard of the silver tsunami out there, and I think that that well has not run dry by far,” added Lessinger. “You have lots of opportunity out in the marketplace. You have younger populations of agents who are looking to scale and grow, and then you’ve got other brokerages where they’re looking for succession, so our strategy has been to matchmake in the marketplace.”
Laser-focused on both helping their brokers grow and offering them succession, Lessinger noted that they’ve taken a flexible approach—doing deals they’ve never done before and facilitating through different models, marrying the model of the brokerage being acquired or merged with theirs.
“In a lot of cases we’ve built bridges,” said Lessinger. “We’re building bridges to retain the agent populations, but also to help those brokers scale and grow on an even deeper level.”
Drilling down further, Lessigner highlighted the importance of support throughout the process—pointing to her own personal experience when she was involved with the sale of her brokerage.
“I remember what it was like as a leader, but also for our agents, so making sure you don’t have breakage is critical to the process, but overall, that strategic approach of matchmaking in the marketplace is critical to success.”
Growing together through partnering up
With a focus on succession planning as a key M&A mechanism, Waugh challenged everyone in the room to be intentional and consistently go through the process on an annual basis—noting that on the other end of the spectrum, you can be the succession plan for folks in whatever market or region you want to enter.
“That’s where we believe we can be the best business partner to our network, helping those folks either transition and maximize the wealth from this asset they’ve poured into for decades or continue to grow their marketshare and their businesses by being the succession plan for those competitors in their market,” he explained.
“I believe that we can actually add real value as a franchisor and as a business partner to our franchisees,” added Waugh, who encouraged attendees to keep the lines of communication open by talking to everyone—not just those who may be having performance issues or companies you’re going to be spending time on.
“Talk to everybody, build a relationship with everybody, and be consistent in those conversations,” said Waugh, underscoring the important role that timing and opportunity play in a company’s growth trajectory.
“All great deals are about timing and opportunity coming into alignment. It’s just being there at the right time and opportunity to make that happen, so don’t focus on just how a company is performing. And when opportunity and timing align, you’ll be the chosen one if it’s a cultural fit.”
Growing through building a plan
Flipping the M&A model on its head has proven to be an innovative approach for McLaughlin and the team at Compass, whose M&A practice took a turn about a year ago—a turn for the better, according to McLaughlin, “while real estate sort of went into a recession in March 2022.”
Pivoting to keep up with the market, McLaughlin shared the firm’s innovative approach to valuing businesses during acquisitions, allowing sellers to maximize their earnings based on their confidence in the market and their business performance.
“Conventionally, you would go out and buy a real estate company on a multiple of EBITDA, and most of the arguing would be about the multiple,” explained McLaughlin. “But when EBITDA goes away or gets diminished, how do you put a value on that? How do you put a value on a business that had a fantastic 2019, 2020 and 2021—and 2022 and 2023 (became) compromised?”
The answer, according to McLaughlin, is to flip the model, which is exactly what they did.
“We took an average of trailing three years of EBITDA, put a multiple on it, paid 50% at closing, then gave the seller the opportunity to pull a trigger anywhere from one to five years on their end,” explained McLaughlin.
This ultimately allowed the seller to determine their own destiny based on their confidence in the market as well as their performance of their business.
“Whenever the seller pulls the trigger, you do the same thing again. You look at the trail in three years, you put the same multiple on it, and you true it up with the initial down payment at closing so that if the seller got lift, the down payment would get lift, and if the seller was flat, the trade would trade flat,” added McLaughlin, who explained that this gives the seller all the competence in the world that if they keep running their business, just the way everybody’s set up here, that they can maximize their earnings.
