Compass’ acquisition strategy faces new tests after Anywhere deal

When Compass began acquiring brokerages across the country a decade ago, the goal was clear; rapid expansion in key markets. It was the second phase of Compass’s plan to expand after offering agent sign-on bonuses and incentives that brought them quick growth.

The company — now the largest residential real estate brokerage in the United States by sales volume — has used mergers and acquisitions to build scale, brand recognition and a reputation for targeting high-end independents.

Steve Murray, senior advisor for HousingWire and founder of RealTrends and RTC Consulting, has watched the company’s moves closely and has worked with some of the companies that Compass ultimately acquired.

He said the acquisition playbook worked remarkably well for Compass — but challenges ahead in the wake acquiring Anywhere Real Estate may prove to be a new kind of test.

Acquisitions with a purpose

Murray said Compass’ buying spree has remained deliberate and focused.

He pointed to firms like Pacific Union, Paragon and Latter & Blum as examples of large-scale acquisitions, while also noting Compass’ interest in smaller but market-leading independents such as Keefe Real Estate in Wisconsin and Lila Delman in Rhode Island.

“They tended to focus on independent brokers that were in high-end markets where they had above-average agent productivity and were profitable,” Murray said. “For the most part, they’ve kept the leadership teams intact, not perfectly, but pretty well, and they’ve retained most of the people. So they did a very good job.”

Retaining personnel, impact on competition

Murray further emphasized that holding onto talent during integration has been one of Compass’ biggest successes.

“They’ve done a good job retaining and integrating the brokerage personnel of the firms they’ve acquired,” he said. “I mean, they’ve had some attrition issues here and there, but by and large, they’ve done a really good job keeping the people they acquired.”

That retention helped Compass maintain market presence while giving it credibility with agents wary of losing local leadership during consolidation, Murray added.

Despite the sheer volume of acquisitions, Murray said ripple effects on competition in local markets were less dramatic than many have projected.

“Have their acquisitions in the markets where they acquired firms created noticeable changes in consolidation in those markets? You know, not really,” he said. “We haven’t seen a rush by other firms to find merger partners, right? We have not seen that where they’ve acquired people.”

The Anywhere question

Compass’ move to acquire Anywhere Real Estate — parent of Century 21, Coldwell Banker, Sotheby’s International Realty and others — marks a shift in scale unlike anything in its past.

“First of all, I don’t think that this deal changes anything for consumers,” Murray said. “A great majority of consumers still choose an agent because they know one or someone referred them. Whether they’re with Compass or Century 21 or Christie’s or any of them, the brand name of the brokerage company is secondary to the selection of an individual agent.

“It usually boils down to a relationship of some kind. It’s been that way for all of the 49 years I’ve been in the industry.”

But while the consumer experience might not shift, Murray said internal hurdles for Compass could be more noticeable.

“The biggest challenge for the acquiring firm is the agents, and secondarily, the employees,” he said. “The first thing Compass has to concern itself with are the two things that agents will be thinking about; what are the benefits to me from this deal and how do I feel about it, now that we’re part of a different organization? That’s it. That’s always number one in the mind of agents.

“Then, of course, you also have to consider how your own agents who were already there are looking at things. How do the Coldwell Banker agents feel? How do the Compass agents feel?”

Cultural clashes

Murray noted that Compass has built a culture of exclusivity for its agents — who view themselves as part of a cutting-edge brand.

He said folding them into a structure where their biggest competitors are owned by the same parent could cause strain.

“Everybody feels special at Compass, between the company being fresh and new, the tech initiatives, the high agent productivity, everything,” Murray said. “So now, they wake up and their biggest competitors in some markets, which may be a Sotheby’s franchise, maybe a Coldwell Banker company owned, maybe somebody like a Christie’s affiliate — now they’re still my competitors, but now we’re owned by the same people.

“In (Compass’) realm, that’s a challenge. It’s going to be a huge challenge.”