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On the heels of a bombshell report by the Wall Street Journal that Compass is in “advanced talks” for an acquisition of Berkshire Hathaway HomeServices, Gino Blefari, HomeServices CEO, immediately sent out an email fervently denying the news. However, the rumor persists, particularly when you have The Wall Street Journal standing by the story. And it’s notable that Compass has not commented on the news.
If true, it’s possible that Blefari’s announcement was a message to Compass about improving deal terms, or to unearth other bidders. After all, there are others out there, such as Apollo Asset Management and Stone Point Capital who have the means to make an acquisition of this size. But, says HousingWire Advisor and Founder to M&A firm RTC Consulting Steve Murray, “That’s a very awkward thing to do and not likely.”
More likely, if the rumors are actually true, “Strategically, he could be addressing the rumors to stabilize their network as discussions continue,” according to Brad Clayton, founder and president of ClaytonWolf Group, an Arizona-based real estate consulting firm.
Right now, the industry will wait for that letter of intent signed by both parties to confirm the rumor. In the meantime, industry experts speculate on the potential impact and implications. HousingWire did not receive a response from BHHS or Compass for comment.
After all, a combined Compass and BHHS would have notched $318 billion in sales volume in 2023, according to RealTrends data, nearly double that of its closest rival, Anywhere Real Estate. The top 10,000 agents alone at a combined company would have represented $360 billion in sales volume and nearly 400,000 deal sides, according to InGenius data.
Is HomeServices losing its appetite for real estate?
In May 2024, just weeks after announcing it reached a nationwide settlement agreement in the commission lawsuits, Berkshire Hathaway HomeServices (BHHS) announced lay offs that included most of its franchise sales team, its event and marketing team and several senior executives. They also announced that they were not going to have any conferences that year. And, according to several sources, they started inserting clauses in their franchise agreements that either party could terminate the agreement with six month’s notice. In hindsight, all actions that could be interpreted that the parent company, HomeServices of America, was becoming disenfranchised with the real estate industry.
According to Keith Robinson, co-CEO of NextHome, in a recent SubStack article, “Buffet is a fundamental investor. When one of his holdings no longer fits his investment criteria, he sells. But, BHHS doesn’t seem to have outgrown his “buy box.” Maybe the decentralized, high-trust nature of real estate sales isn’t a business he wants to stay in.” He also stated that, “Buffett could be capitalizing his balance sheet in preparation for an economic slowdown.”
“There have been rumblings over the past several years that the parent company, HomeServices, has not been over enthusiastic about real estate,” says Clayton.
That could be, but according to Murray, speaking generally about the M&A market, “It’s pretty clear that we’re at the bottom of the housing sales decline. In addition, the fears related to the litigation and settlement are in the rear view mirror with most of the brokers I speak to saying that their business hasn’t been impacted as deeply as they thought. So, if you’re going to make a big investment, this is when you buy. It’s also a good time to sell because the belief is that the next two, three, four years, we’ll see a recovery. For sellers, if you run things right, you’ll have a real plum that you invested in at the bottom. For buyers, the earn out is a good option moving forward than it was two years ago.”
Berkshire Hathaway HomeServices of America, which had roughly 820 brokerage offices and 270 franchises, did not turn a profit in 2024, largely due to the settlement agreement tied to Sitzer/Burnett.
What’s in it for Compass?
According to Murray, an acquisition of this size, would still only give Compass about 15% to 18% market share nationally. “I’m being liberal with those numbers,” he said. But, “It would immediately strengthen Compass’s market share in New England, Philadelphia, Washington, D.C., Atlanta, South Florida, Kansas City and other areas.”
“This acquisition makes a lot of sense for Compass,” says Clayton. “Stategically, it makes sense and there aren’t many, if any, brands that could make this type of an acquisition.” Plus, Clayton adds, “Compass would get very mature leadership and well-respected brokerages into a newer brand with newer technology.”
Of course, an acquisition of this size doesn’t come without risks. “Retention would be the biggest risk,” says Murray. After all, it’s the biggest risk in any acquisition. Will the agents stay? Will the brokers stay?
Despite the swirling rumors, BHHS has firmly denied any acquisition talks with Compass. Whether this signals a shift in future consolidation trends or simply a case of misinformation, one thing is clear, says Murray, “The industry is ripe for consolidation.”
