Anyone familiar with valuing/selling real estate brokerages?
That’s about it… I’m familiar with some approaches, but I know there are variables… agents, GCI, nets, etc.. anyone have experience with selling a brokerage ? Merger/acquisition? Someone has approached me about my office (no immediate intent to sell, but I’d like to be ready) Thanks in advance to anyone cool enough to give some insight. I’m in Illinois if that helps.
[{"id": "j27p7fz", "text": "That\u2019s a tough one. I\u2019d love to hear the advice.", "replies": [], "depth": 1}, {"id": "j28el6f", "text": "I'm happy to help you market and sell your business for a fee.", "replies": [{"id": "j28udd7", "text": "No promotion on the sub plz", "replies": [{"id": "j2dc3n8", "text": "Sorry, I was surprised someone who has a salable real estate business doesn't have the skill set to value their own revenue or to understand the value of their revenue stream is relative to other investments in the economy. I should have been more on topic and less sarcastic.", "replies": [], "depth": 3}], "depth": 2}, {"id": "j2949v3", "text": "Do you specialize in RE brokerages?", "replies": [{"id": "j2dbojc", "text": "No, my specialization is valuing things that real estate agents are licensed to sell.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j28rmen", "text": "As a starting point, what are the company\u2019s assets and liabilities? What is the yearly profit? For a real back-of-the-envelope calculation, multiply your yearly profit by 16. That\u2019s the average P/E ratio of public companies over time.", "replies": [], "depth": 1}, {"id": "j28tj44", "text": "https://eqvista.com/ebitda-multiples-by-industry/\n\nHere's a nice write up with a section on Real Estate Services multiples. It's suggests an ebidta multiple of 20.78x and it's from 2021. Probably much lower than that at the moment.\n\nAre you curious about pricing? How the buyers look at underwriting? Do you have an offer or just planning? Roughly what are your revenues? What services do you offer? Why are you thinking about selling?\n\nI know two of the executives (Avison Young and formerly Colliers) that were responsible for acquiring brokerages. I can reach out with a little more detail on your scenario. Dm me", "replies": [{"id": "j2940vt", "text": "I am curious about pricing because since someone threw the thought out there I figured I might as well have an idea of my value and yes, I\u2019d like to know what a potential buyer\u2019s UW might look like. I\u2019m not actively selling and not considering a sale currently, but I figure knowing this will also help me create better targets and goals for agents/office and be more calculated in growing the business. We offer residential brokering and some commercial. We are pursuing commercial more actively.", "replies": [], "depth": 2}, {"id": "j29ngkm", "text": "Pure brokerage isn't going for 20.78x.  I can 100% guarantee that.", "replies": [{"id": "j2achze", "text": "Definitely agreed", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j28va79", "text": "I\u2019d like to hear answers to this as well. I\u2019ve only dealt with law firm acquisitions. \n\nPart of me wants to get real basic with it in both objective and subjective criteria - if I was to encourage due diligence on buyer\u2019s end why would I want to buy your brokerage? What will I get for X amount of money? Your agents staying put with a new captain at the helm? How vast is your CRM info? Are your clients and listings with you on an individual basis or more firm-based and are they going to stay if you leave? Do you plan to stay on board? Are you going to open a competing practice or bring your clients to a competing practice? Would a merger make more sense?", "replies": [{"id": "j291jak", "text": "Actually the law firm acquisition knowledge would be great too. Have quite a few attorney friends that I\u2019d like to help in the future. Would be nice to be ready for that.", "replies": [], "depth": 2}], "depth": 1}, {"id": "j28zbm2", "text": "Only offering a little assist here, but is there a PM component? Have heard it said that Property Mgt keeps the lights on and brokerage is the boom / bust. Combo of PM and Brokerage offers some diversification- mitigating the ups and downs. Brokerage only would have to have quite a risk factor attached, I assume?", "replies": [{"id": "j291e68", "text": "Not yet\u2026 PM is something I\u2019d like to add at the firm, but at a later time because I want to make sure we have the proper resources to ensure quality and timeliness for any issues that arise.", "replies": [], "depth": 2}], "depth": 1}, {"id": "j2a375q", "text": "From what I know - a mixed company (commercial property management + brokerage) goes for anywhere between 5-8 x EBITDA.  The numbers that I have are from Canada (British Columbia).", "replies": [{"id": "j2bseqe", "text": "That seems high to me. Where did you get those numbers?", "replies": [{"id": "j2bywv9", "text": "There have been few deals / acquisitions that I've watched over the past 2-3 years.\n\nFor the companies that got sold , the majority of the revenue came from property management (50-70%) and the remainder from leasing and project management .\n\nA lot of major real estate companies have been increasing their recurring revenue , mainly after covid.\n\nFeel free to DM if you want to chat more.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j2ayuht", "text": "I\u2019ve been involved in over a dozen acquisitions of boutique cre brokerages by a large publicly traded firm.", "replies": [], "depth": 1}]