M&A Slowdown Sparks Shift to Local Brokerages and Team-Based Models

In a recent podcast, Steve Murray discusses the slowdown in real estate M&A activity, the rise of team models, and the evolving landscape for agents and brokers.

Navigating M&A Trends

In recent years, there’s been a noticeable slowdown in merger and acquisition (M&A) activity among major national brokerages.

Steve Murray, founder of RealTrends, shed light on this trend during a recent episode of the RealTrending podcast with host Tracey Velt.

Their conversation delved into the dynamics of the real estate sector, including M&A shifts, team-based brokerage models, the effects of commission compression, and strategies for growth for both agents and brokers.

Current State of M&A

They kicked off the discussion by examining the current state of M&A in real estate.

Murray noted that since the market downturn over two and a half years ago, many national firms, such as Berkshire Hathaway HomeServices, Anywhere, and United Real Estate, have retreated from the M&A game.

In contrast, only Compass and Howard Hanna are still actively pursuing deals.

This change has led to a surge in M&A activity among local brokerages instead of at the national level.

When Velt asked about valuation trends in this evolving landscape, Murray pointed out that profits have generally declined, resulting in lower valuations across the board.

The fierce price competition that once defined the national market has eased, giving way to a more localized competitive dynamic.

While local firms may not command the high EBITDA multiples of the past, the scarcity of quality brokerage firms keeps valuations from plummeting.

Emerging Brokerage Models

Velt then probed into emerging brokerage models in today’s environment.

Murray highlighted the significant rise of real estate teams over the past five years, emphasizing that brokerages have a unique advantage in generating leads for agents.

This capacity not only drives growth but also boosts profitability.

Addressing lead generation challenges, Velt noted that some brokers struggle, prompting her to ask why team strategies might be more effective.

Murray responded that medium to larger brokerages often clash with agents who feel they are competing against their own teams.

He stressed the need for a shift in mindset, where agents might accept lower commission splits in exchange for leads and resources provided by the brokerage.

As their conversation wrapped up, Murray and Velt acknowledged the opportunities and challenges facing agents and brokers today.

Murray observed that today’s buyers are becoming more informed, creating a chance for skilled agents, teams, and brokerages willing to deepen their expertise.

He also pointed out the exciting potential of leveraging artificial intelligence to enhance operations and cut costs within brokerages and for agents alike.

Source: Housingwire