Mergers and Acquisitions have become an increasingly popular growth strategy among property management companies. In an earlier blog titled, “What Industries Are Growing Through M&A,” we mentioned property management companies as a top industry for mergers and acquisitions. So let’s dig a little deeper and learn what is being gained by M&A and what trends are driving M&A in the property management marketplace.
What Property Management Companies Are Trying To Gain Through M&A:
- Size/Proximity to New Locations: In some cases, especially in the Charlotte area, management companies are looking to grow across State lines. Rather than a Charlotte based management company opening a new location in South Carolina, they will often acquire other established management companies already based in South Carolina. This is also true within the State as well (Charlotte -> Greensboro, Wilmington, Raleigh, etc.)
- Economies of Scale: Management companies deal with many different service providers from landscapers and painters, to accountants and attorneys. As management companies grow and manage additional communities through M&A, they are better able to pass cost savings (via economies of scale) onto their clients. Doing so, theoretically, makes the management company more attractive in the market place as they are better able to offer attractive rates.
- Additional Management Offerings: There are many local management companies who specialize in residential communities while others mainly do commercial associations. Through M&A, management companies may be able to acquire residential work if they didn;t already have it, or vice versa.
What Trends Are Driving M&A In The Industry:
- Real Estate Brokers Wanting Out: Community management is NOT a glamorous field. In lean times (2008 – 2012) many small/local real estate sales offices turned to property management when they were struggling to sell homes. With real estate “Hot” again, some real estate agents are looking to shed their portfolio of community associations to better focus their efforts on more lucrative selling activities.
- Lack of Succession Planning: Similar to the CPA industry, some “mom and pop” community management companies simply have no succession plan, while other “younger” management companies are seeing this as a great opportunity for M&A.
- National Players Coming To Charlotte: Up until 2008, community management in Charlotte was pretty much locally run (i.e. 20 or so management companies throughout the State and SC, perhaps). However, in the past 5 to 7 years, Charlotte has experienced an increase in nationally known management companies who often launch their local office by purchasing a locally-owned community management company.
This may be un-chartered territory for some management companies, and LBA Haynes Strand is here to help. We have a team that understands the needs and the financial issues associated with HOAs and property management companies. If your property management company is looking to grow through M&A, schedule a no-cost consultation with us and we will walk you through the steps for a successful merger or acquisition.