“Anytime
there
is
a
downturn
in
housing
sales
or
a
shock
to
the
industry
like
with
the
litigation
settlement,
although
we
have
not
faced
anything
like
this
in
my
47
year
career,
there
is
uncertainty,”
Murray
said.
“When
you
have
circumstances
like
this
environment
in
any
industry,
it
is
the
best
time
for
those
who
are
a
bit
stronger
or
whose
timelines
are
a
bit
further
to
be
talking
to
other
brokers
in
your
marketplace
about
roll
ins
and
acquisitions.

Due
to
the
uncertainty
facing
the
industry,
when
structuring
deals
right
now,
Murray
and
Wright
noted
that
very
few
firms
are
providing
cash
up
front.
Instead,
firms
are
using
five-year
earn
out
plans
with
stop
loss
provisions,
meaning
that
the
earnout
paid
to
the
seller
is
linked
to
the
transaction
volume
closed
by
their
agents,
and
can
be
adjusted
for
large
drops
in
the
number
of
home
sale
transactions
or
a
sudden
decrease
in
gross
commission
income
due
to
potential
changes
brought
about
by
the

commission
lawsuit
settlement
agreements.

“As
a
seller
I
want
an
opportunity
to
get
as
much
from
this
earn
out
as
I
can
and
as
a
purchaser,
if
the
market
declines
further,
I
don’t
want
the
burden
of
a
payment,”
Murray
said.
“When
you
get
right
down
to
it,
it
is
a
matter
of
risk
and
who
is
going
to
take
what
risk.”

However,
before
firms
can
begin
to
dive
into
the
financial
side
of
the
deal,
prospective
buyers
and
sellers
must
figure
out
if
they
are
a
match.

“People
think
that
M&A
is
about
finance,
deal
structure
and
20%
of
it
is
that,
but
80%
of
it
is
relationships,
and
commonality
of
purpose
and
interests,”
Murray
said.

Due
to
this,
Murray
said
finding
an
M&A
partner
that
is
a
good
cultural
fit
is
essential
to
a
successful
deal.

“What
does
your
instinct
say?
Can
you
see
yourself
working
day
in
and
day
out
with
this
person?”
Murray
said.

Kevin
Walsh,
the
CFO
of


Century
21
New
Millennium,
joined
Murray
and
Wright
on
stage.
He
also
warned
that
leaders
should
temper
expectations.

“You
may
fall
in
love
with
these
deals
and
then
there
are
all
these
last
minute
changes
and
then
you
feel
stupid,”
Walsh
said.
“So,
just
don’t
over
commit.”

Once
firms
have
decided
to
embark
on
an
acquisition
transaction
together,
the
speakers
warned
that
firms
need
to
be
committed
to
full
transparency
for
all
aspect
of
their
business.

“You
need
to
start
with
the
end
in
mind,”
Walsh
said.
“You
are
not
going
to
be
sell
unless
it
makes
financial
sense
to
the
acquiring.
We
want
to
go
as
deep
as
we
can
to
understand
the
individual
accounting
that
is
occurring
and
the
independent
contractor
contracts.”

Both
Walsh
and
Chrissy
Oliver,
the
vice
president
of
M&A
at


Compass,
noted
that
when
they
are
looking
to
acquire
firms
with
core
services
including
integrated
or
joint
venture
mortgage
and
title
firms,
there
are
some
extra
levels
of
vetting
required.

“We
like
deals
where
core
services
are
non-existent
or
very
weak.
The
regulatory
environment
is
not
favorable
for
the
industry
right
now,”
Walsh
said
of
marketing
service
agreements
and
joint
ventures.
“So,
that
is
something
you
need
to
be
highly
aware
of
if
this
is
a
space
you
are
going
to
be
moving
into
with
an
acquisition.”

Oliver
added
that
at
Compass
there
are
hyper
aware
of
how
compliant
the
JVs
or
MSAs
some
of
their
potential
acquisitions
are
due
to
the
level
of
scrutiny
faced
by
such
a
large
firm.

“We
pay
very
close
attention
to
compliance,”
Oliver
said.
“We
tend
to
focus
on
two
things,
one
ownership
structure,
a
lot
of
times,
is
different
for
the
integrated
services
company
than
the
brokerage,
so
the
way
we
think
about
it
is
that
we
focus
on
the
brokerage
opportunity
and
then
the
mortgage
or
title
and
escrow
opportunity
following
to
make
sure
that
they
are
compliant
and
not
going
to
get
us
into
any
hot
water.”
 

While
an
M&A
transaction
may
seem
intimidating,
industry
leaders
said
that
at
the
end
of
the
day,
firms
that
decide
to
do
pursue
an
acquisition,
should
keep
in
mind
why
they
ultimate
decided
to
go
this
route,
whether
that
be
growing
market
share,
providing
better
support
for
their
agents
or
taking
the
opportunity
to
reap
the
financial
benefits
of
the
firm
they
have
spent
so
much
time
and
energy
growing.

“Understand
why
you
are
pursuing
the
transaction
in
the
first
place,”
Oliver
said.
“What
is
your
motivation
for
pursuing
that
partner
or
pursuing
a
sale?
And
then
keep
that
at
the
forefront
in
your
mind
because
it
is
going
to
get
really
challenging,
the
process
is
long,
they
are
going
to
ask
you
questions
you
don’t
want
to
answer,
but
understanding
why
you
are
doing
this
and
constantly
checking
in
with
this
is
really
important.”