Some of the biggest figures in the industry have given Estate Agent Today their reaction to the news - broken yesterday afternoon - that Countrywide and LSL Property Services have been holding merger talks.
While most see the possible merger as sensible and perhaps inevitably, especially given Countrywide’s dire performance in recent years, all see major challenges ahead - and sadly that looks like bad news for staff and some historic brands.
On brands, Countrywide’s website lists 58 different agency names and claims a total of 850 branches nationwide. LSL’s website lists 18 brands, including its financial services and surveying titles, and in terms of its main agency brands it says there are 175 Your Move, 106 Reeds Rains and 28 Marsh & Parsons offices - although those were later 2018 figures.
Michael Day, managing director of Integra Property Services and industry compliance expert, and a former main board director at Connells. He says: “Scale is a key factor in estate agency – volume drives results … Scale at any price isn’t useful but without it, the margins are difficult to achieve.
“We are obviously speculating at what ‘level’ a ‘merger’ will take place and whether all of the baggage still carried by both businesses (particularly Countrywide) will be carried forward or conveniently left behind in some way - debt, empty premises, etc. If a new business can emerge undistorted from some of these issues, it will be better able to focus on revenue generation and profit.
“There are clear synergies and obvious opportunities for significant cost reduction… but there will be large one off costs too. ‘Losing’ a large number of the trading brands would look to be on the cards in order to get greater recognition and value for those that remain.
“Areas such as property management, asset management and surveys and valuation work will be huge. Both LSL and Countrywide are both strong in these areas and, if they get their leverage of relationships even better, could be even more significant drivers of revenue and profit.”
Russell Quirk, property PR guru, founder of Emoov and investor in a Keller Williams Franchise says: “This is probably last chance saloon for Countrywide and is a move born more out of desperation rather than any strategy. Of course, Countrywide haven’t had a strategy since about 2016…
“A merger is the only thing that they can really do in handing the whole mess over to a better executive team to bail them out. But that comes with an obvious consequence - consolidation.
“Consolidation of senior management, regional and area directors and managers and branches, is a benefit to the wider merged business in terms of cost reduction, but that assumes that the the bosses can actually pull off the successful integration of systems, people, technology and, above all, cultures.
“I suspect that Embley and Co, as the authority in this deal, will simply identify all of the overlapping CWD/LSL branches, identify the weak ones - and then close them all. Hundreds, probably, just like they did across Your Move and Reeds Rains last year. This will be a terribly uncertain time for the staff of both businesses and there will be blood.”
Graham Lock, founder of the Federation of Independent Agents and founder of House Network, says: “It’s not a great surprise. There’s a danger that if one plus one doesn’t equal three then there seems little point and could end up ineffective. Creating a ‘super agency’ is possible but only if there’s an underlying strategy to reposition the brands within and move them into a more modern framework. It’s a huge challenge/opportunity. Will they take it? Let’s see.”
Andrew Stanton, formerly of Sequence and Blackhorse and now head of Estate Agency Insights and Strategies says: “LSL executive director Helen Buck talks a lot of sense. Many larger companies allow mediocre branches to go ‘trundling along’ despite that fact they weren’t really contributing, even though they needed a large infrastructure to support them.' 2020 is not the time for legacy approaches to agency - if a branch last made a big profit five years ago, might it be kinder to cut it?
“Countrywide … maybe they should take the Helen Buck strategy and roll it out. I certainly would, no one likes redundancies, but it’s not much fun working in a zombie branch either.
“In the 1980s to the early 2000s physical branch networks were key; but post the smartphone and Amazon, customer care and a good service are now key. I do not care if you have six offices in a 20-mile radius, do you sell or let? do you provide other services? are you value for money?
Ben Taylor worked at Countrywide for 15 years until late 2016, now chief exec and regional operating partner at Keller Williams UK. He says: “I would be interested to know the answer to the following questions - How will this proposed merger benefit the agent? And how will this merger benefit the customer?
“In our view, it is most important for our industry to focus on better enabling the agents and creating improved wealth building opportunities for them. This will result in higher standards across the industry. Agency is a local business and should be based on relationships between the agent and the customer. Great businesses have a relentless focus and care for their customers.
“Only those designing the merger will know if it better enables both of these key areas.”
Adam Day, now UK international expansion leader of new national agency eXp UK, and founder of the Hatched online agency. He comments: “It’s felt to me an inevitability that there will be a merger between Countrywide and someone else
“I don’t see that they’ll have any choice but to close many dozens of the branches down across the country where a branch is under performing or there are too many of their competing brands within a specific location.
“There’s plenty of upside to the senior management as I think shareholders will likely see this as a positive move, but I can’t see too many immediate benefits to the ‘boots on the ground’.
“The estate agency landscape has changed so quickly over the last 10 years or so, and it’s incredibly difficult for large businesses to adapt - if the merger leads these two great businesses to change their marketing strategies, their consumer engagement and the technology they adopt for consumers and agents alike, then it will work out fine.
“But then they could do all of that, without merging in the first place…”