Real Estate Mergers

Would a Merger Benefit Your Brokerage?

In a number of cities, real estate sales are strong and prices are rising.  This may be a good time to evaluate a Merger.

Why Merge?

Increase Revenue

A merger could help your brokerage improve its revenue generating ability by expanding its market size; adding more agents; and increasing your product mix – like adding community management services.

Reduce Cost

The right synergy could help to reduce overhead and business costs by providing access to new technologies; improved efficiencies; and better performance from staff and agents.

Acquire Assets

You may want to increase your agent roster by 25%. Or, maybe you are looking to acquire office locations in certain areas. Or perhaps you looking to get access to new technologies.

Increase Financial Capacity

You may want to merge with a company that will help your brokerage to secure a higher financial capacity.  The increase in capital capacity can help with further business development; increase your brokerage profile within the real estate industry; and help you to expand into other markets and services.

Incentives for Managers

Merger can help to retain top performers and attract new talent.  Bigger companies can afford to offer higher salaries and bonuses to their managers.

Tax Purposes

If your brokerage is generating significant taxable income, you can merge with a company that has substantial carry forward tax losses. After the merger, the total tax liability of the consolidated company will be much lower than the tax liability of your independent brokerage.

 

Categories of Mergers

A merger is a financial transaction in which two companies join each other and continue operations as one legal entity.  Mergers typically consist of five different categories:

-1-  Horizontal merger: Merging companies are direct competitors operating in the same market and offer similar products and/or services.

-2-  Vertical merger: Merging companies operate along the same supply chain line.

-3-  Market-extension merger: Merging companies offer comparable products and/or services but operate in different markets.

-4-  Product-extension merger: Merging companies operating in the same market offer products and/or services complementary to each other.

-5-  Conglomerate merger: Merging companies offer completely different products and/or services.