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How Buyers and Sellers Can Reinvent Themselves through the Mergers and Acquisitions Process

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Industry Advisor by Jose Perez

RISMEDIA, December 10, 2010—Merger and acquisition activity has been relatively quiet over the past couple of years. However, 2011 could potentially see an increased amount of activity for a variety of reasons:

-The realization by some sellers that although their company’s value may still be severely depressed, it may be three to five more years before they might see the kind of numbers that were flying around back in 2004 and 2005. These sellers may not be willing and/or able to wait that long.

-Other sellers will similarly come to the conclusion that their heart and/or pocketbooks are not prepared to do what it will take to reinvent their company and will acknowledge that selling will help their agents and put the onus of dealing with all the changes on someone else.

-On the buyer side, those who are reinventing themselves will have a value proposition that will allow them to approach sellers—not just as a buyer, but as someone who will be able to offer their agents things they are not able or willing to do and extract value for their business that is not there today.

-Buyers will also see that by consolidating market share through acquisitions they will be able to spread the cost of reinvention over more producing agents and potentially justify Internet marketing, Web platform, lead management and other important investments.

All of this brings us to culture
Unfortunately, many brokers don’t spend enough time considering culture before setting out on an acquisition strategy. Besides the actual financial considerations of a merger or acquisition, the next most important factor a broker must think about is whether their company’s culture meshes well with that of the target company. Many a transaction has looked good on paper only to end up being a bad investment because the cultures of the two companies were not compatible.

Questions you might want to ask yourself before buying or selling:
-Does the other company have similar ethics?
-Does the other company have a similar compensation plan? (i.e., tough for a traditional company to buy a 100% shop, for example)
-Will their agents get along with your agents and management team?
-What demographic are they selling to compared to your company and how well might they mesh?

In today’s environment of an emerging, new, real estate brokerage paradigm, culture also means a company’s willingness to reinvent. In other words, do they “get it?” If the buyer, for example, is forward-thinking, technology-oriented and operating in a café style office, they might want to think twice about acquiring a company whose agents don’t believe in Internet marketing and still expect to give all their agents private offices.

If you are growing and reinventing your company, embarking on an acquisition strategy could potentially help you achieve your goals faster and leverage the changing market. If you are a seller, finding someone to buy your company who is effectively reinventing themselves could help you unlock your agents’ potential by being able to bring in new tools and systems.

Reinvent yourself!

Jose Perez is the president of PCMS Consulting, a full service consulting, sales and management organization that specializes in real estate industry issues. For more information, visit www.pcmsconsulting.com or e-mail jperez@pcmsconsulting.com.

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