merger

Companies Are Not Designed to Merge

by Victor Lund on January 3, 2017

Merger Puzzle

WAV Group has participated and observed the mass amounts of merger activity that has hit a high pitch in 2016. It is happening at all levels of our industry – agents merging into teams, brokers merging into mega brokers, Association of REALTORS® mergers, and MLS mergers. Based upon our work schedule for Q1 of 2017, this trend does not seem to have any ebb in sight. WAV Group will facilitate more M&A activity in Q1 than any other quarter in our firm’s history. Company founders and Boards of Directors are often not open-minded about mergers. The first reaction to a merger discussion is naturally defensive because the merger itself often pits a company that is stronger against one that is weaker. The stronger company often overlooks the centers of excellence that the weaker company has. The weaker company often feels dominated and under appreciated. Commit To The Evaluation I fondly recall an awkward meeting where two boards who were considering a merger were stuffed into a junior suite at an industry conference to interview consultants for merger facilitation. My responsibility was to pitch them on WAV Group. I started out by asking them if they had decided to enter into discussions in good faith, had they signed a non-disclosure agreement, were they willing to share financial information, etc. They looked at me like I was crazy. Consultants do not build consensus. They build merger models. I went on to explain that Boards must commit to a full out merger evaluation to have any chance of success. Boards must agree to enter into merger discussions and create merger models that are real. This involves performing customer research, financial modeling, governance modeling, staffing, communications, contract review, etc. In effect, you fully plan your merger before you ever call the question at a board meeting. The role of a consultant is to build the model, collecting information from both sides and working collaboratively to see what the new entity looks like. Both boards should have an answer to every question. The Threat or Opportunity In many mergers, there needs to be some notion of a shared threat or opportunity. It begs the question, what happens if the merger does not go through. If the answer is nothing, then there is probably no reason to merge. However if the answer is tied to protecting both organizations from a mutual threat, or allowing both organizations […]

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John Aaroe Group of Los Angeles Merges With Pacific Union

by Victor Lund on December 14, 2016

pcja

John Aaroe Group of Los Angeles has entered into a merger agreement with Pacific Union.  The combination of the two firms will bring them in line with both Alain Pinel Realtors and RealtyONEGroup, two other California based firms in the National top 10 with sales in the $12 Billion range. John Aaroe Group will retain all of its branding and management. John Aaroe Group is one of the leading independent firms on the west side of Los Angeles with more then 400 agents across 9 offices in the communities of Pasadena, Downtown LA, Toluca Lake, Studio City, Sherman Oaks, Baldwin Hills, Sunset Strip, Brentwood, and the fabulous Rodeo Drive office in Beverly Hills. The firm does just under $2.5 Billion in transactions and currently has just under 200 listings ranging from a low of $840,000 to a high of $135 Million. Here is an overview of the combined entity. This is the second deal of this size completed by Pacific Union CEO Mark McLaughlin. No one is really sure what inspired McLaughlin in 2009 when he was operating his boutique Morgan Lane office. But inspired he was. That was the year that he purchased Pacific Union from Brookfield which was the same size as the John Aaroe Group. At the time, Pacific Union was doing about $2.2 Billion in transactions with 430 agents across 17 offices. Since that time, Pacific Union has grown to one of the 10 largest real estate firms in America with sales under $9 Billion. Pacific Union was grown by developing brokerage operation excellence, hard work and the development of great agents. The expectation is that similar growth projection are available for John Aaroe Group. The similarity of the transaction size is uncanny. The two firms have the same DNA, they are independent, strong brands, great agents, full service, offering luxury real estate services to the middle and upper price points of the market. Both firms work smart, agile, and 100% focused on the culture within their company. To be sure, a real estate agent has arrived in real estate when they are invited to join Pacific Union or John Aaroe group. Neither firm wants very many agents, but both seek to attract the industry’s best professionals and to support each one at cultivating a strong, successful book of business. Pacific Union has seen some remarkable growth through many of their technology innovations that John Aaroe […]

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