I am writing about a subject I touched on briefly in my prior blog, the chance that RE/MAX International, a 100% privately held company, will go public. My own feeling on this is that they intended to do so before the market crash of the past 2 years.
Let's look at the facts:
A company going public likes to a) get its financial affairs in order, and b) acquire as many valuable assets as possible before going public.
RE/MAX International has recently had a rash of purchases of territories that had previously sold to franchisors. There are only a few reasons I can think of for this. One, these Franchisors might have reached and age and a position in life where they simply didn't have the interest in continuing management. They probably made such a fortune that they no longer needed to work. However, few people would have the wealth to acquire these franchisors other than the master franchisor. In addition, these regional franchise groups, by way of their agreements with International, cannot go public themselves. So, they're stuck and, if they want to cash out, International would be their only way to do so. To me this is a highly likely scenario.
A second possibility is that the franchisors were in financial trouble and needed to be bailed-out. I would consider this possible, but not likely.
Finally, a very logical reason for the buy-outs would be to have greater assets to bring public. If Liniger & Co. were able to acquire thes franchises at a relatively low multiple, with the assumption of bringing the company public at a substantially higher multiple, it's a no-brainer. Further, the overall percentage of franchises directly owned by International, as compared to being in the hands of a variety of smaller players, would be seen as a strong positive in the marketplace. Further, with ridiculously low costs of funds over the past half decade, these purchases were more than likely highly accretive to earnings.
If you weren't aware of RE/MAX International's numerous acquisitions of regional franchisors, here are some links with articles from different news sources:
Publication: PR Newswire
Publication Date: 24-APR-07
Delivery: Immediate Online Access
DENVER, April 24 /PRNewswire/ -- An agreement has been reached for RE/MAX International to purchase the independently owned regions of RE/MAX of Florida and RE/MAX Carolina. Together, the two regions will represent an addition of 420 offices and over 10,000 agents to the RE/MAX company owned region operations. Combined with the February acquisition of RE/MAX of California & Hawaii, 2007 will mark the single greatest year of growth for...
These articles are from a pay site for full info.
Wednesday, April 25, 2007 -
Parent company to buy Re/Max of Florida
RE/MAX TO BUY HAWAII, CALIFORNIA,
Publication: San Diego Business Journal
Publication Date: 12-MAR-07
Delivery: Immediate Online Access
Author: Bengtson, Stacey
Company: RE/MAX of Hawaii; RE/MAX of California; RE/MAX International Inc.
Parent Acquires Regional Re/Max Offices: Re/Max of California and Hawaii was acquired by the franchise headquarters of Denver-based Re/Max International. The purchasing agreement for an undisclosed sum was for the 448 independently owned and operated offices and more than 10,000 affiliated agents in California and Hawaii.
RIGHT OFF THE BAT, AMONG FLORIDA, THE CAROLINAS, CALIFORNIA, HAWAII (AND SEATTLE - THOUGH I HAVEN'T INCLUDED AN ARTICLE FOR IT YET) - INTERNATIONAL HAS PROBABLY SECURED 20,000 MORE AGENTS OF ITS 100,000 TOTAL AGENTS WORLDWIDE. REMEMBER, THEY ALREADY OWNED MANY OF THESE REGIONS OUTRIGHT BEFORE THEY STARTED THE BUYING BINGE
Finally, with respect to getting their financial house in order, "RE/MAX is also becoming compliant with the federal government's Sarbanes-Oxley financial-disclosure law, which is required for publicly-held companies. The company is hiring compliance officers, an outside auditor committee, and is drafting mock Securities and Exchange Commission reports, according to the Denver Post report. " This is from http://realtytimes.com/rtpages/20050105_remaxrumors.htm -
So, what do you think? While the market is down, RE/MAX International has been acquiring franchisors left-and-right. Mr. Liniger and his co-founders are also getting up there in years (though they still are probably the most amazing management team in the US today and could teach any group in the world how to run a streamlined company). What happens if something happens to Dave? Look at Wendy's (sorry - sick joke).
It is very important to brokers and owners. For some franchisees, its one reason to renew their franchise when it comes due each five years. For new franchisees, it is something that should be considered.
Finally, if International does decide to go, who will get what? While Mr. Liniger has made a fortune off his company, he has created a system that has, by far, helped more Realtors achieve wealth and a good lifestyle than anyone else before him or since.
Few people recall that, for the most part, women were not agents in the industry before RE/MAX. People forget that individuals were rarely permitted to promote themselves over the company before RE/MAX. Other changes spurred on by RE/MAX go far beyond the scope of this already too lengthy Blog, but RE/MAX has been an innovator for decades. When will they hold their last private party? What would you do if you knew they were going public?