In December I predicted a few things for the 2024 property market and the industry.
One of those predictions was to state that this year would see a significant level of M&A activity.
Now, as most are aware, I am pretty humble when it comes to saying ‘I told you so’, not wanting to blow my own tuba too much (not a trumpet, that’s too small). But we are not yet even at the end of January and we’ve seen a number of acquisitions already, two of them huge.
These are the merger of Belvoir and TPFG – a £215m deal; and this week’s announcement that Leaders Romans have purchased Stirling Ackroyd, Alexander & Co and Peter Ball adding over 40 branches to their existing 245.
Lomond Group also kicked off the year in style with its 50th acquisition in just three years, snapping up Centrick’s three high street offices. Hull Gregson and Charters Group have also been busy hoovering up local rivals.
So, 2024 starts as it means to go on – with an aggressive consolidation of the UK estate and letting agency sector. Mark my words, there is a whole lot more to come.
Let me explain why.
For starters there are a number of big firms that have publicly stated their mission as one of expansion through acquisition. Dexters, Foxtons, the aforementioned Leaders Romans and Lomond have all set out their stalls as ambitious property business buyers and no doubt for a range of individual reasons. These guys are all well funded and are serious players who will each seek to buy dozens of branch offices this year.
But here’s why the landscape for small to medium sized estate and letting agency businesses is ripe for a bit of musical chairs even outside of this top table of headhunters.
Actually, the perfect recipe for M&A traction is a question of appetite by both acquirers and by willing sellers – and in my view 2024 provides the perfect storm..
Usually buyers and sellers are somewhat misaligned. When sellers are happy to sell, buyers are less willing to buy at their price given that such circumstances are usually when the market is poor and company valuations low due to market sentiment and diluted revenues and profits.
Similarly, when sellers are less keen it’s when the market is buoyant and prices are increasing and therefore reluctant to accept a figure that ‘might be higher next month’. A classic dilemma.
But as we exit 2023, a year that was a challenge for agents with stunted revenues and higher costs, owners of independent agencies are better primed to let go because last year would have spooked them, a reminder that the estate agency sector can bite them on the **** pretty quickly.
‘Time to get out’ many will think.
In contrast, purchasers of independent agencies see that the data is starting to demonstrate that last year’s tougher market is behind us. The coming months, on balance, are likely to be better for transactions given:
+ The much prophesied house-price crash has not happened, and won’t
+ Bank of England borrowing rates have stabilised
+ Inflation is returning to ‘normal’
+ Unemployment has not risen significantly
+ GDP growth, whilst marginal, has been resilient
With this economic reality in mind, those looking to invest in agency businesses for the long term will see this year as prime to pounce as the property market stretches its legs once again.
Throw in some election giveaways, especially potential tax cuts, a stamp duty revision and a rumoured, subsidised deposit FTB mortgage announcement and you have a cocktail of circumstances that will trigger a hunger for property entities.
Rarely is an industry so chock-full of smaller, independent players versus corporates. I estimate that true corporates account for less than 20% of total estate and letting agency branches and people employed in property.
In automotive, travel, white goods, clothing, fast food, insurance, housebuilding – the lion’s share of each sector is owned by few but huge conglomerates. It makes sense from an economy of scale perspective to operate multiple brands from a central cost base and with all of the procurement advantages that go with such consolidation.
As 2024 evolves you’ll see that whilst estate and letting agency are late to the party, we will be pushed in the same direction for all of the above reasons.
Russell Quirk is co-founder at ProperPR, the PR property agency, and a well seasoned property expert for UK media
