A consultant who had been involved in some of the high profile estate agency mergers and acquisitions over the past 12 months has revealed some of the key reasons for the flurry of companies that have been bought and sold recently.
Anup Agrawal of consultancy Accelve has advised different sides of the larger deals including Foxtons and Leaders Romans Group’s recent purchase of independent agency Gibbs Gillespie.
He says this flurry of activity, which has also included TPFG acquiring Hunters, which completed on Friday, and Linley & Simpson’s merger with fast-growing agency corporate Lomond Capital, are proof that private equity cash is becoming increasingly interested in the estate agency sector.
“Unlike many other industries, the property industry remains incredibly fragmented and when PE firms look at the way SME independents control such a huge slice of the market, they believe there’s room to build empires,” he says.
“Even the big agencies are lucky to hold a few percent of the overall sales market – remember the united Connells and Countrywide entities will still be lucky to have 9% of the market.”
And as The Negotiator reported recently, Britain’s now second largest agency Purplebricks has been making a lot of noise recently after revealing that it holds just 5% of the market and that, it hopes, in two years to have 5.7%.
Agrawal says other factors are at play. This includes many shareholders of larger firms such as Hunters and Douglas & Gordon realising that their firms need to team up within larger organisations to grow, agents like Dexters winning City backing to buy more competitors and companies like Foxtons changing tack to acquire market share through acquisition rather than cold starts.
“Outside the corporate world it’s more about lettings – many agents are coming to retirement and both Covid and the tenant fees ban has accelerated their plans. And there are plenty larger competitors and investors happy to acquire their portfolios,” he says.
“I don’t think it’s about revenue – most agents have persuaded their landlords to pay more following the fees ban – but lettings is getting harder and harder to make money from on a small scale, and any agency with fewer than say 100 properties is now looking around for options.”