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Mergers & Acquisitions 101

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RISMEDIA, March 14, 2011—Not all mergers and acquisitions are the same, however, they all need to be very organized and focused. In order to create a win-win situation for everyone involved, the buyer needs to pay attention to the seller’s needs and all the parties involved need to be protected with a confidentiality agreement. Here, Lauralee Ensign, chief operation officer, Century 21 M&M Associates discusses M&A basics that should be kept in mind as you begin the process.

Lauralee Ensign
Chief Operating Officer
CENTURY 21 M&M and Associates
www.c21mm.com

Just like any sale you need to start with a willing buyer and seller. Mergers and acquisitions (M&As) are very similar to a real estate deal; you must first find out the needs of the selling real estate company owner—they vary in many aspects. Some owners are at retirement age, some have been challenged by a recession that has continued longer than planned, and others might have been top agents that became owners and have found that they miss the freedom that went with selling real estate. Whatever the reason, a buyer needs to pay attention to the seller’s needs so that it can be a win/win situation for everyone involved.

The next step is to make sure all parties are protected with a confidentiality agreement. It is very important for a buyer to make sure they have done due diligence with regard to the culture of the business; take time to make sure they are a good match prior to proceeding (i.e. brand, no brand, similar commission schedules, is it a company with a team atmosphere or is it a very independent spirit?). This level of upfront research is very important to help determine whether or not to move forward.

After you make the decision to move forward, the real work begins in analyzing the books of the business. Collect as much information as possible to do a full investigation. You need past tax returns, building leases, P&Ls, commission splits and employee contracts—just to name a few. What role if any, does the seller continue to play? Are you able to conduct a site visit without raising eyebrows? These are all things that have to be addressed up front prior to an M&A.

Now that the buyer and seller are in agreement to solidify the deal, the agreement must be put in writing to be effective and it must be done through legal channels. Sometimes the buyer and seller may have to revisit several points in a contract until the “meeting of the minds” has been achieved. Once all are in agreement, you can proceed with the plans to roll out the news. This can be very tricky if not done properly. The brokers can get together and find the best road map to follow for each company.

No matter the size of the M&A, the process needs to be very organized and focused—not all M&A’s are the same. They are very time consuming and the work does not end the day after the news is announced to the agents. A transition team needs to be in place to make sure everything is smooth and working once you bring on the new team. Whether blending a new office or several branch offices, communication is the key to uniting the new team. Keep in mind they are not familiar with the way you do business. You will have to prove your new business model to the new team and re-recruit them.

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