Clash of the Titans? Looming Mobility Industry ConsolidationBy John B. Sculley, SCRP, Vice President – Managing Director RIS Consulting Group Just in time to catch the usual seasonal wave of relocation volume, the courtships among buyers and sellers of mobility companies is heating up. Some owners are primping up their dowdy offspring to attract the best of suitors and dowries. Others are banking on unsolicited outside offers as an exit strategy, the corporate equivalent of an elopement. Some small orphaned relocation companies will be happily adopted in the hope of synergies ever after. Whatever their motives and methods, more mobility company owners are looking to sell than we’ve seen in recent years. As economic recovery brings some relief to the suppressed value of their companies, owners are finally acting on mothballed strategies to divest their relocation businesses. Facing flat growth and recapitalization pressures for infrastructure and globalization, some owners would rather get out now than double down for the long haul. Their timing is good. Prospective buyers have the cash (or the backing) to move quickly on a good value. They recognize that too many companies are chasing too few prospective clients, and the industry’s excess capacity has held down organic sales growth, P&Ls and sale prices. They also know that competing worldwide requires scalability and a bigger volume base to amortize reinvestments. They believe that now’s the time to “go big or go home.” We’re about to see the big get bigger in the mobility industry as small and mid-sized companies are absorbed at an accelerating pace. We’re expecting 3 - 5 RMC sales within 2015 alone. Here’s the banner-tow for brokers and relocation directors: “Look out! Your corporate referral streams will change!”
As the mobility industry consolidates, fewer and larger companies will control a greater share of relocation-generated real estate referrals. This is compounded by increased corporate relocation outsourcing and tightened policy controls on capturing referral fees, still the economic engine of the industry. Local Relocation Departments will tend to have fewer relocation companies as referral sources. Will you be working with the growing firms or will market shrinkage leave you out? The keys, of course, are:
The relocation management industry has two camps of “titans” regarding real estate affiliations. Some mobility leaders are owned by or affiliated with companies having strong direct presence in residential real estate: Cartus (Realogy); Brookfield Global (Brookfield); Weichert Workforce Mobility (Weichert); NEI Global (NP Dodge); RELO Direct (Leading RE); etc. Although these companies do not rely solely on owned or affiliated brokerages and do maintain broader referral networks, they evidently see strategic and client advantages in vertically integrating their mobility and real estate businesses. They already collectively control the majority of relocation industry volume. Most of them have made large competitor acquisitions in the past. In the other camp, are those RMCs that do not have major real estate affiliations and instead have independent referral networks: SIRVA Relocation; Altair Global; Paragon; Graebel Relocation; AIReS, etc. These companies emphasize localized performance-based networks regardless of brand affiliations. If they were to acquire their brand-affiliated competitors, new real estate referral volume might be freed up to flow through their independent networks … but most of these companies have grown organically rather than through mergers/acquisitions. Will they change their approach in this window of opportunistic consolidation? In such uncertain times, brokers and relocation directors can take little for granted about traditional sources of corporate relocation referrals. It is too soon to tell whether the brand-affiliated companies will extend their dominance or the independents will reclaim more market share. However, in the interim, RDs can be marketing to a broader spectrum of RMCs, to hedge your bets against ownership changes and to be prepared for potential new volume resulting from mergers. You’ll want to know how each firm chooses its referral partners for your footprint, and what you can do to get, defend and grow your share of referrals. When fewer prospective RMC clients are available, maximizing your relationships and security in the mobility market is only prudent. John B. Sculley, SCRP, is Vice President – Managing Director of RIS Consulting Group, johnsculley@rismedia.com. |