STAY CONNECTED!
    
newsletter-button

OTHER FEATURES

ValPal
Mergers of independent agents: how to achieve completion

From the outset of any merger, it is vital that each agency understands and can identify its purpose and the USP of the selling agency. Not only should both partners and owners acknowledge this, but before entering into any negotiations parties must be certain that the deal will achieve its intended aims. 

Whilst mergers may fall through due to disputes over the price, too often mergers fail because their original purpose was inaccurately identified. 

Typically, mergers between estate agents are designed as a transfer of the corporate vehicle owning the agency or as a transfer of the estate agent’s resources.  

The structure of a merger will have tax and risk consequences for both businesses and it is highly recommended that parties seek the appropriate professional advice from the outset and throughout. 

For a merger to ultimately be successful and achieve its intended aims, both agencies must feel they are securing the best deal for themselves whilst simultaneously being understanding of the other party’s reasons and requests. In particular, it is crucial that acquiring agency carries out full, yet efficient, due diligence. 

However, in the execution of distressed mergers and acquisitions, a transaction can take place at considerable speed and it may not be possible to undertake meaningful due diligence. This higher risk born to buyers will often be reflected in a lower sale price. Likewise, the benefits of speed in this instance will be passed along to sellers through the preservation of the acquired agency’s name, reputation and employee jobs.

Aside from the merger not achieving completion, there are still likely to be additional issues and pitfalls along the way. The average deal involves six months’ negotiation and ten weeks’ execution. During this time, owners are likely to be distracted from the day-to-day business objectives and many agencies will see a drop in sales unless they are extremely well prepared.  

Furthermore, it is likely that employees will be distracted by the signs of merger activity emitting from behind management’s doors. Increased email traffic, phone calls, meetings and paperwork are all tell-tale merger signs and unless buyers and sellers manage the process in a sensible manner, the market will quickly catch on to what is happening. 

Mergers are specialist and often complex deals and ultimately in order to secure the successful completion of any merger, it is paramount agencies select advisors who have a thorough understanding and practical experience within the sector.

You can read the first of Mark's two-part series on mergers here.

*Mark Lucas is a Partner at Barlow Robbins LLP, and is very experienced in advising on mergers between estate agents

imgcollapse