Years of market sluggishness and aggressive growth by massive companies imply massive offers of the previous have been doubtless a prelude to extra acquisitions in 2025, Intel survey outcomes and interviews recommend.
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Fee lawsuits and battles involving the Nationwide Affiliation of Realtors have dominated current headlines. However quietly within the background, one thing else was additionally occurring: Main acquisitions and mergers.
In different phrases, was 2024 a prelude or a postscript to the consolidation story?
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To search out out, Intel contacted trade specialists — for each on- and off-the-record talks — and surveyed brokerage leaders in our newest Inman Intel Index survey.
The takeaway from these efforts is that quite a lot of components are converging to probably make 2025 a banner yr for mergers and acquisitions. Put one other method, there’s a superb probability that 2024 was in reality only a prelude.
However on the identical time, not everyone seems to be prone to be a victor on this story. As a substitute, massive and highly effective corporations which have a monitor document of succeeding in lean occasions often is the ones making essentially the most headlines for M&A offers this yr.
Most brokerage leaders aren’t targeted on M&A
In January, Intel requested brokerage leaders to rank mergers and acquisitions on a scale of 1 to 5. One indicated that M&A was not on their radar, whereas 5 indicated that imminent discussions have been going down. The outcomes instructed that mergers and acquisitions should not particularly excessive on the precedence record for most of the almost 200 brokerage leader-respondents.
Practically 47 p.c of survey respondents chosen one, that means M&A isn’t on their radar. One other 12 p.c chosen two, equally indicating that M&A is a low precedence.
Solely 8 p.c of respondents chosen 5, with one other 12 p.c choosing 4 — responses indicating that M&A is a serious precedence.
Outcomes have been comparable when Intel requested leaders about M&A in 12 months. In that case, 36 p.c of respondents chosen one — which once more on this query meant the subject is “not on the radar” — and one other 16 p.c chosen two. Solely 11 p.c of respondents chosen 5.
Acquisitions move to the large corporations
“I think it’ll be a very active year,” Chris Heller, president of OJO/movoto.com, instructed Intel in a remark that captured a broader sentiment. “I think a lot of companies are looking to grow and I think we’ll see a lot of activity.”
The takeaway, then, is that M&A will not be evenly distributed; en masse, acquisitions will not be on each radar, however its a subject that’s very a lot on the radar of some massive gamers.
The specialists supplied a number of causes that 2025 may be lively for M&A.
A gradual market has put stress on smaller corporations for a number of years now.
“You’re going to see companies basically saying I don’t see a way out of this and I want to cash my chips in,” Russ Cofano, CEO of Collabra Know-how, instructed Intel.
“As the industry goes through challenging times, you tend to see a lot of consolidation,” Heller mentioned.
Bigger corporations comparable to Compass have managed to develop regardless of a gradual market.
Compass, for instance, reported development in each income and agent depend within the first three quarters of 2024.
EXp’s agent depend development largely remained stalled in 2024, however the firm did report income beneficial properties within the first three quarters of final yr.
“The big companies probably feel like they’ve weathered the storm,” Heller mentioned. “They’re not looking at 2025 as, ‘let’s just get to the other side.’ They’re looking at 2025 as, ‘now we have to grow.’”
“With the big players, this is part of their strategy, they are actively looking at how to grow their companies with acquisitions,” Cofano mentioned. “Versus the smaller corporations that may be extra opportunistic in the best way they method an acquisition, by relationships at native ranges.
Cloud-based corporations comparable to eXp, LPT, and Actual are rising and have leaner operations than conventional brokerages. Some M&A might consequently happen as conventional operations search for entry to these enterprise fashions.
The Actual Brokerage, for instance, reported final fall that its agent depend exploded by greater than 2,000 between July and October.
“It’s nearly impossible for a traditional brick-and-mortar company to suddenly become cloud based,” Cofano mentioned. “They almost need to kill their old model.”
Non-public fairness corporations have been sitting on the sidelines for the final a number of years.
“A lot of the acquisitions are going to be from private equity,” Ben Kinney, co-founder of Place, which made 5 acquisitions final yr. “They’re sitting on enormous buckets of cash that they haven’t been able to deploy. They’re looking for opportunities and my phone is ringing off the hook.”
Kinney additionally mentioned that capital markets might give extra money this yr to “strong companies,” placing them in a “position to gobble up the weaker ones.”
Brokers are most all for making acquisitions
Intel additionally requested brokerage leaders who do have M&A on their radars what sorts of offers they could take into account. Most indicated they’re extra all for gobbling up opponents than they’re in being wolfed up themselves.
A plurality of respondents, or 48 p.c, mentioned their brokerage buying a competitor of their market was one thing their management groups would take into account this yr.
The second hottest response, at 38 p.c, pointed to their agency making an acquisition to increase into a brand new market.
Solely a complete of 23 p.c indicated their management staff can be open to promoting, both with that staff staying in place or with them leaving.
The robust survive
Ongoing market stress means one kind of acquisition that will develop into widespread this yr will contain corporations that haven’t but found out the brand new regular.
“On the outside they may not look like they’re struggling, but they likely are,” Heller mentioned of some acquisition targets. “Things aren’t improving at the rate they need them too.”
“For any real estate brokerage or brand, the key measure of success is how many great real estate agents you attract and retain,” Marc King, former president of Keller Williams, instructed Intel. You develop otherwise you go backward, there is no such thing as a stasis. Thus, any firm not prepared to evolve, develop and improve its worth to the native agent will doubtless be a goal of acquisition.”
Nonetheless, the splashiest offers may very well contain corporations which are thriving.
“In those scenarios the companies being acquired have to see a 1+1=3 scenario,” Cofano mentioned. “They’re not companies that are necessarily financially struggling or feel like they don’t have a path forward. But they feel like with the acquisition, they and their agents can do financially better with new ownership and resources and scale and all those things that a larger organization can provide.”
Kinney additionally pointed to money move constructive corporations — suppose regional brokerages or title corporations — as attainable acquisition targets. “These companies are sold to private equity firms, public companies, or other profitable private firms trading on a multiple of EBITDA.”
Trickle down economics
Although Intel survey questions targeted on brokerage leaders, proptech got here up repeatedly in Intel’s conversations for this story. And the concept is that for all the difficulty the market has given brokerages, it has been no less than as dangerous for a lot of proptech corporations who make cash from actual property professionals — professionals who in as of late might have a lot much less money. The result’s that 2025 could also be a interval of winnowing for the proptech world as corporations merge in an effort to outlive, or to chop losses on the eleventh hour.
In different phrases, proptech might develop into floor zero for actual property M&A in 2025.
“There’s a large number of startups that launched in the last five years that are in the stage where if they’re not profitable they’re going to be targets,” Heller opined. “If they aren’t successful in finding a home then they often times merge with other companies.”
Kinney famous that in tech there could also be corporations which have “bad product fit and low revenue,” during which case “these companies are often fire sales, purchased for scraps by smaller companies looking to create new revenue streams or boost their own numbers.”
Different corporations might have good merchandise, however wrestle with income development. “These companies are acquired through a combination of cash and stock, offering founders an opportunity to have a bigger win with the acquiring company,” Kinney additionally mentioned. “They are typically bought by companies seeking to expand their customer base or product lines.”
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