What Buyers Need to Know About Acquiring a Brokerage

Stacy Strobl and Kenny Lynn, EXIT Southeast Regional Owners, have some advice for those who have mergers and acquisitions on their mind.

When it comes to acquiring a brokerage, Stacy Strobl and Kenny Lynn definitely know a thing or two.

Stacy and Kenny started working together in 2013 when they established their EXIT Realty Corp. International region.

Six years later, they have consistently earned top honors for the company signing over 100+ new franchises.

In 2019, the duo broke an all-time company record, signing 38 franchises in one calendar year!

Here’s their advice for buyers who have mergers and acquisitions on their mind.

What should a broker/owner consider before a merger and acquisition?

Considering a merger or acquisition of a real estate franchise is an incredibly exciting career move.

Typically, when this is on a person’s mind, it means that they are not getting what they want or need from their current situation.

Research and due diligence are very important, and, ultimately, you need to determine if this is the fit for you and the culture you desire.

At the end of the day you need to consider if a move will fit into your list of priorities. Will it fulfill the areas in which you desire to see improvement?

What is the most common motivation for a buyer in a merger?

The motivation for a merger is subjective and our experience has been very diverse.

Sometimes what’s needed is a different company culture or leadership. Other times, it can be the need for stronger brand marketing or better technology. Maybe, they simply desire a solid retirement plan or more residual income.

What does an existing brokerage have to bring to the table as a buyer?

At EXIT Southeast, we look for someone who appreciates teamwork, family, and has the same values for a positive culture.

It is also important to determine if this person has the resources to be successful. You want someone who can work arm-in-arm and understand the concept of “help us, help you”.

How important is it to find a good lawyer?

This can be an important issue. Many come to the table with a family attorney who has possibly helped draft a will.

We recommend that people do their due diligence.  Find a real estate attorney who specializes in franchise purchasing, someone who can serve as an on-going resource.

Are there forums you can join where people (mentors) talk about this?

We have a private North America-wide broker/owner support group on social media, which is a tremendous resource.

On it, people can express issues, ask questions, and gain great insight from colleagues and mentors from a huge geographical area. It is so exciting to see everyone networking and bouncing around ideas. Thanks to social media, we are no longer limited to a state or region.

We also have an on-going Real Estate Industry Leaders blog where issues get addressed. Many local real estate boards also have an owner council as a great resource.

What should you ask for during due diligence?

Within the southeast, there is a mandatory 14-day waiting period before you can sign a franchise agreement. This is a great opportunity for extra due diligence. 

As regional owners, we go over the franchise agreement line by line. Such thoroughness ensures that potential owners have time to ask questions, clarify information, and consult with an attorney on anything if needed. The priorities and nature of the questions are going to be subjective to the individual.

Personally, we appreciate this time as an opportunity to determine if each party is a good fit — we all want it to be a successful partnership.

How long should the whole process take?

We’ve seen it take 14 days and, in some cases, two years!

Our goal isn’t to push or sell a franchise. Throughout this process, we consider ourselves matchmakers.

When the timing and opportunity is right for the individual, we do everything in our power to help support and expedite the process.

Any tips on evaluating the price for a real estate brokerage?

We don’t necessarily quote prices or numbers on existing brokerages.

The territory prices we offer are set by the Federal Trade Commission based on population and territory size.

If it is a merger of an existing brokerage, consult with a business appraiser.

Should the broker/owner stay on staff after the acquisition?

For a smooth transition, it is always recommended that the broker/owner stay on staff. However, this is not required.

What should one consider in this particular economic time?

Make sure you have the reserves to support your business through difficult times — like an unforeseen pandemic or an election year.

Thankfully, we are working with a commodity where there is always a demand and need.

Also, it is a very unique opportunity to have a franchise like EXIT that offers residual income. This has proven time and again to be highly beneficial (especially during health emergencies). Plus, it pays through retirement and death for the beneficiary.

How can you appeal to the other owner?

Having something of value to sell is important.

This could be a healthy existing agent count, good profit loss statement, or a record of steady transitions per agent production.

Having a well-respected family or impressive company name also has its appeal.

Again, this is subjective to the person desiring change.

What are some common mistakes after a merger or acquisition?

Sometimes, there is an expectation that a sign will change your circumstances and will magically make things better.

As the new broker/owner, you still have to prove yourself. You have to dig in, roll up your sleeves, and embrace the culture you are trying to create. It definitely takes time and you can’t give up.

If you build it, they will come is actually true, as long as the foundation is a good culture.

How should you communicate changes with your staff and agents?

For a smooth transition, good communication is key. 

You can’t shock your team with what is going to be new and mandatory. Create common and familiar threads. People don’t all embrace change in the same way.

You have to show them with your actions and help them transition into a better way of operating.

What help should they get? Who should they rely on?

Each brokerage experience is different. We provide continued support on the local office level as well as regionally and nationally. 

Our leadership consistently shows that we can be relied upon and are available for help and support. We even have a franchise support hotline!

What should you consider when buying a franchise?

When considering a franchise purchase, look beyond a real estate company offering only one income stream. 

Look for a brokerage that offers beyond single-level residuals. You are only as good as your last closing is a hard way to live. EXIT is unique to the industry by providing residuals.

Agents who are looking for something to own need to also consider passive income.

When evaluating franchises, how do you find a company that has a family culture while offering the latest in technology and training?

A company that is interested in helping you and your agents get to the next level can demonstrate this commitment. 

When the culture is right, you’ll see people trying to lift one another up.

It also helps to look for an organization that works beyond itself. Do they work with Habitat for Humanity, or hurricane and disaster-relief efforts?

Giving back to the community is a great indicator of a company’s commitment and care beyond just ‘the bottom line.’

One of our mottos is ‘leading with love,’ and honestly, it makes a difference.

When you work beyond yourself, this isn’t just a game-changer — it’s a life-changer!

Ready to get growing?

Book your free 15-minute recruiting consultation.