The UK’s largest franchise firm Belvoir says a rush of acquisitions by its franchisees of competitor companies both during 2017 and into the New Year suggest the lettings industry faces a wave of consolidation as the fees ban looms.
Belvoir says its lawyers are currently processing a “robust pipeline” of competitor acquisitions by its franchisees in recent months.
The company says these acquisitions will be completed during the first three months of the year and that the “appetite for securing portfolio acquisitions reflects the entrepreneurial spirit of our franchisees who are adapting to changes within the sector and seeing opportunity for growth as the sector consolidates,” says CEO Dorian Gonsalves.
Belvoir also says it helped its franchisees buy up 23 competitors last year, adding 2,264 properties to its lettings business.
This brings the total number of properties managed by Belvoir Group companies to over 58,000, and helped increase its network revenue by £3.3 million, exceeding the £3 million target set by its board for 2017, and raising its head office fee revenue by £350,000.
The high number of competitor acquisitions has also been boosted by Belvoir’s Assisted Acquisitions programme, which encourages existing franchisees to buy local firms, helped with loans provided by the Belvoir head office of up to 30% of the purchase price.
But not that many of the franchisees who took part in the scheme took up the offer to borrow the full 30%, Belvoir says. The average amount borrowed from the Belvoir head office was 10%, with franchisees instead utilising their own cash reserves or sourced funds from other loan providers.
Over half of the buying spree took place within Northwood, the rival franchising firm Belvoir took over in June 2016. Fourteen of the 23 purchases came from Northwood, while one came from Newton Fallowell and the remaining eight from Belvoir franchisees.
“The Assisted Acquisitions programme has proved to be very popular within the recently acquired Newton Fallowell and Northwood networks,” says Dorian Gonsalves (pictured, left).
“Of the deals completed in 2017, over two-thirds were undertaken by these networks, who had not previously benefitted from the expertise and financial support that has been available to the Belvoir network for several years.”