Property Natter – will 2021 be the year of the merger?

At the back-end of last year and the start of this, the biggest news stories in town – besides debates over the stamp duty holiday, the market remaining open during the worst months of Covid, and when Boomin will finally launch – have been about mergers/takeovers.

And it’s been some of the country’s biggest property firms involved, with the possibility of mega companies being formed if the Connells buyout of Countrywide comes to fruition (as seems increasingly likely) and The Property Franchise Group (TPFG) succeeds in acquiring Hunters (as also seems increasingly likely).

Questions abound. Will it become Connells Countrywide? Will the Countrywide name be abandoned entirely to shake off the negative connotations it has garnered in the last few years, where its decline has been quite staggering? Will it delist?

Connells says it’s likely to keep the 40-plus brands in the Countrywide roster, which account for some 650 branches. This would add to its own 580 branches and make it comfortably the biggest agency operator in the country. Connells, one of the few agency names still owned by a bank or building society (it’s a wholly owned subsidiary of Skipton Building Society), has proved to be one of the more stable mega-brands in recent years.

While Countrywide has moved from disaster to disaster since Alison Platt took over and began the disastrous attempt at a retail/agency crossover, Connells has largely been on the up, acquiring new brands regularly throughout the last decade. Its only misstep was the purchase of online agency Hatched in 2015, which it closed with immediate effect only three years later, citing the online/hybrid model as commercially unviable.

It’s expected that Connells will seek to make substantial back-office savings ‘through the elimination of duplication’ and possible movement of both companies’ head office activities into one building.

Connells, which by purchasing Countrywide – still the biggest and arguably best-known name in the agency world, despite its high-profile issues – is attempting to consolidate its position as one of the top dogs in the world of agency, will be the senior partner in the deal, and it will be interesting to see how things play out with the remainder of Countrywide’s top brass and its shareholders (if indeed the deal is agreed at a special AGM on February 15).

Countrywide has been much diminished in recent years, and it could become like other once great agency groups in completely disappearing as a brand name in the not-too-distant future.

Whatever you think of it, that would be a shame given its role in the history of estate agency. The Countrywide Group was formed in 1986 when the first two UK Stock Exchange-listed estate agency groups, Bairstow Eves and Mann & Co., were acquired by Hambros Plc and merged to form Hambro Countrywide.

Two years later Hambro Assured was established, making it the UK’s ‘biggest life company start-up’ and the first life assurance business to be wholly owned by an estate agency group.

Since 1986, growth has been mainly through acquisitions. This included the creation of the largest residential surveying and valuation business in the UK when Nationwide Estate Agents and Nationwide Surveyors were acquired from the building society in October 1994, at the height of the sell-off of agency branches by lenders after a disastrous involvement in the estate agency sector. As I explored in this Natter, when lenders and agency mix, it has rarely gone well.

In the 90s, Countrywide added Spencers, Faron Sutaria and well-known London brands such as PKL and John D Wood & Co to its growing network of estate agency branches. In the early Noughties, the estate agency division increased further through the acquisition of Friends Provident in 2002 and both Freeman Forman and Bradford & Bingley (ex-Black Horse Property Services) in 2004.

The acquisition of Bradford & Bingley’s estate agency business enabled Countrywide to develop the UK’s largest specialist sales unit for land and new homes.

In 1998, the Group’s major shareholder Hambros Plc (a now defunct British bank with a history dating back to the first half of the 19th century) demerged, with the shares passed into a wide range of institutional investors’ hands and the name of the Group changed to Countrywide Assured Group.

It was, of course, also one of the founding agencies behind Rightmove in 2000, along with its current suitor Connells, Halifax and Royal & Sun Alliance.

Private firms first got involved with the company in May 2007, when it was acquired by the private equity finance group Apollo Management LP. Countrywide was no longer in public ownership, and before long the shareholder group was extended in May 2009 to include Oaktree and Alchemy Partners. The latter was at one stage the favourite to take control of Countrywide, but recently formally scrapped its proposals.

Throughout the 2010s, the Group continued to be acquisitive, acquiring luxury brand Hamptons International and the Letmore group, Mortgage Intelligence (one of the UK’s biggest mortgage distribution channels), Yorkshire agency Blundells, and commercial property adviser Lambert Smith Hampton (which extended Countrywide’s reach into the commercial market for the first time).

The Mortgage Bureau, The Buy To Let Business and BTW Shiells were also snapped up, along with Green & Co, ES Group, Tushingham Moore and Douglas Newman Good Commercial.

It also found time, in March 2013, to be formally admitted to the London Stock Exchange, becoming Countrywide PLC. It had reached the very top.

As recently as 2017, it was raising £37.8 million in share placing, representing around 10% of share capital.

Then came the slow and steady decline. It’s too simplistic to just blame Alison Platt and the disastrous retail revolution – although that was a major contributor in harming the Group seemingly irrevocably - because since she left in 2018 things have still been a mess, with boardroom chaos and the ‘Back to Basics’ programme doing very little to turn the tide.

It seemed, even before Platt, to be moving in too many different directions, with too many fingers in too many different pies. It was arguably too acquisitive and became too big. There comes a point, if you’re not careful, where you become too large and too fragmented, which dilutes the original purpose of what you were doing in pursuit of the cheap buck elsewhere.

Countrywide’s recent history has been littered with bad moves, bad appointments, bad ideas and bad management, and it can only be hoped that Connells – with its intense knowledge of the sector and its years of experience – will be able to revive it in some shape or form.

And there’s a lesson in there somewhere for other agencies and property companies (mentioning no names) who grow too big, forget their customer base, and try to take the Jack of all trades approach. Sometimes less is more. Big, bloated, top-down organisations rarely last the pace.

The rise of franchise

Meanwhile, franchising seems to be becoming ever more popular. In my recent interview with Dorian Gonsalves, the CEO of Belvoir Group, he laid out – backed up with some very strong figures – why franchising has worked very well for Belvoir in recent times. Few companies had a better 2020 than the Belvoir Group.

The Property Franchise Group, for its part, seems determined to become the biggest franchisor in the UK. Its origins lay in Martin & Co, the well-known regional agency businesses launched in Yeovil by Richard and Kathy Martin in 1987.

The Martins soon added a lettings service and in 1995 began to franchise their business model, recruiting franchisees from a wide variety of backgrounds, and providing intensive initial training and ongoing support. In 2003, Ian Wilson was recruited as the first external Managing Director, with a new strategy agreed to focus exclusively on lettings.

But in late 2012 the decision was taken to reintroduce an estate agency service and a year later the business listed on the AIM. Another year later, it acquired the master franchise rights from Legal & General to four historic property brands - CJ Hole, Parkers, Ellis & Co and Whitegates.

In September 2016, the Group acquired EweMove Sales & Lettings Ltd, the well-known online estate agency launched by David Laycock and Glenn Ackroyd in 2013.

Now it is going for the big-time with its approach to take over Hunters – a 200-branch business founded in 1992 by prominent Tory backbencher Kevin Hollinrake and director John Waterhouse. It launched its first franchise in Knaresborough in August 2006.

The approach was first made public in early December last year and would add Hunters’ 200 branches to the existing 300 that TPFG has under its existing franchise operations. It would still be some way off Connells and Countrywide (if they merge), but would take it beyond Belvoir, which is currently the UK’s largest property franchise group with 396 individual businesses nationwide.

As Dorian said in his recent interview, the rise of franchising actually makes a lot of sense in a pandemic, as it could be seen as lower risk than starting out on your own as an independent, while you also receive support and advice from the central company.

“In previous recessions franchising has attracted more people due to uncertainty in the jobs market. We’ve proved that franchising is highly resilient against economic downturns as it’s agile, efficient, and franchises are operated by highly motivated people,” he said.

In times of crisis, companies consolidate and swallow up rivals while the opportunity is there. It’s hard to see how there will be bigger takeovers or mergers than Connells/Countrywide and TPFG/Hunters, if they happen, for the rest of the year, but those involved will be hoping they go better than the last major merger of Emoov/Tepilo/Urban.co.uk.

Equally, the above may set off a trend in the rest of the property industry, with rumours already abounding that Boomin and OnTheMarket could merge to take the fight to Rightmove and Zoopla. Expect more of this type of thing while the economy remains in a fragile state.

Until next time…

*Nat Daniels is CEO of Angels Media, publishers of Estate Agent Today and Letting Agent Today. Follow him on Twitter @NatDaniels.