Real Estate

RE/MAX CEO Reveals His Company’s Mergers And Acquisition Strategy

Adam Contos said during an earnings call Friday that his company’s third-quarter acquisitions enhance RE/MAX’s value proposition and provide new revenue streams.

RE/MAX has long sought to strengthen its company footprint by acquisition and re-acquiring independent regions. But in recent years, the company has also bolstered its tech team and diversified its offerings to both affiliated agents and consumers through acquisitions.

On the company’s third-quarter earnings call, RE/MAX CEO Adam Contos gave insight into the real estate franchisor’s merger and acquisition (M&A) strategy.

“Much of our focus over time has been on re-acquiring independent regions but we also continue to explore intriguing, complimentary opportunities in and around our core businesses of franchising, mortgage and real estate,” Contos said. “Ultimately, as part of our ongoing and disciplined capital allocation process, we focus on those opportunities that we believe have the highest value-creating potential.”

Ideal acquisition candidates check two boxes for RE/MAX and it’s franchise brands, which include both the residential real estate franchises and Motto Mortgage, according to Contos.

Both Nick Bailey, RE/MAX’s chief customer officer, and Ward Morrison, the president of Motto Mortgage, play key roles in surfacing ideas on how to grow the company by acquisition.

“A key objective of our M&A strategy is reinforcing and enhancing the value proposition of our two franchise brands and helping drive their long term growth,” Contos said. “We’re also interested in opportunities that diversify and broaden our revenue and growth potential.”

Both the third-quarter acquisitions of wemlo and Gadberry Group accomplish those objectives, Contos said. The two bolt-on acquisitions the company made in the third quarter naturally enhance RE/MAX’s core businesses.

Wemlo is a 20-month-old, Florida-based fintech startup that provides third-party mortgage loan processing services. The company developed a cloud service for mortgage brokers.

RE/MAX plans to integrate wemlo products into the Motto Mortgage space, but will continue to market to independent mortgage brokerages, providing the company another revenue stream.

In mid-September, RE/MAX also announced it acquired Gadberry Group, an Arkansas-based location intelligence data company with 16 employees.

The firm provides tech products aimed at solving geospatial challenges — essentially those related to location mapping — through accurate and precise location data, according to RE/MAX.

RE/MAX had been a client of the firm for more than a year and it’s location software services were integral to the revamped RE/MAX consumer-facing experience. The acquisition allows RE/MAX to retain its current services with no disruption. It also allows the company to “dive much deeper into the data world,” according to Contos.

“That can open up all sorts of interesting new possibilities for us,” Contos said.

Gadberry Group has clients across multiple industries and RE/MAX plans to grow its client base.

The RE/MAX technology platform for both consumers and agents was also built on the back of the previous acquisition of booj. Earlier in the year, RE/MAX also acquired the AI-powered real estate lead nurturing startup First.

Contos gave insight into the company’s M&A strategy on the back of the company’s third-quarter results, where the company reported agent count increased 5.1 percent from the previous quarter and total open Motto Mortgage franchises increased 27.9 percent.

RE/MAX also reported total revenue of $71.1 million in the third quarter, a decrease of 0.5 percent year-over-year due largely in part to previously announced agent recruiting initiatives that reduced both continuing franchise fees and marketing fees funds. The company reported a net income of $3.6 million for the quarter.

“Evolution of our strategy, continued investment in our businesses and a focus on profitable growth, alongside the housing industry’s remarkable run has helped our business recover quickly,” Contos said. “We believe we’ve recaptured the momentum we had at the start of 2020, before the pandemic upended everything.”

Email Patrick Kearns

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