Unprecedented multiples for title agencies

🎶Listen
Do you want to know a secret?
Do you promise not to tell? Whoa oh, oh
Closer
Let me whisper in your ear
Say the words you long to hear 🎶
-The Beatles

Wouldn’t it be great if you knew exactly what your agency is worth? It’s not as if you can search comps or a MLS for title agencies like you can for houses.  How cool would it be if someone could tell you who is likely to buy your agency and what sort of deal there is to be had?. How do you know if the first unsolicited offer is good? Why do underwriters approach title agency valuations differently than private equity or other strategic buyers? Where and how is the market for title agencies shifting?

We are fortunate to know things which are not common knowledge. The ‘secrets’ we possess are varied and borne of experience.  We’ve worked with and sold dozens of title companies since 2009, and that experience provides us with ‘inside information’ in terms of economics as well as a unique understanding of the needs and approaches of buyers of all stripes.

One of the ways we add value is by sharing our insights and applying the information we possess to help agencies achieve their goals. Sometimes, agencies get approached by prospective buyers and are so flattered at the attention and the fact that some big company wants them that they commence a negotiation without the benefit of truly knowing the market value of what they often have spent their lifetime building. It’s ironic that folks who have built their business in many ways on the strength of consumers choosing not to do a FSBO (and instead hiring a Realtor who refers the deal to the title company) forget all that when it comes time to selling their own business and instead sell to the first buyer that comes along. Why would anyone FSBO their agency instead of exposing it to the market properly?

The last six months have been fascinating for us. Fresh patterns are emerging. Assuming the agency is a good one, we are seeing multiples today higher than we have ever seen before.

It is a clear Seller’s market for title firms!

Why?

Theories abound.

There are incumbent ‘strategic’ players eager to expand. If they are title agencies, they seek to leverage their infrastructure to basically apply their ‘machine’ to more transactions. The goal is to lower costs for the target and add another channel.  Other buyers have captive business they send to title companies and are simply trying to monetize the value of their economic output.

Underwriters are always looking to grow but are faced with challenges unique to their business model. The way they compete with one another reminds me of the MAD magazine comic strip Spy vs Spy. They may be different colors but they are otherwise identical. They are always at war with each other and usually alternate between victory and defeat…stealing staff and clients from one another in what seems like a never-ending game. They worry about things like how other agents will react to an acquisition and whether agents will still write on their paper if they own a competitor too close to home. Their world is way more complicated than most.

We are seeing massive growth in private equity’s interest in title. Many of them are eager to get ‘into the game’ and buy what they see as ‘platform’ companies. We’ve spent a lot of time with many of these firms extolling the virtues of title and helping them understand how their skill set can be used to grow a properly constructed platform company. These guys usually pay the most and can be EXCELLENT partners. They often come with fresh ideas. A mindset of innovation unencumbered by the past or legacy infrastructure makes for a healthy industry. Naysayers will exclaim that title companies should be sold to title people -but that has not been our experience this year, especially for larger agencies.

Against all this are sellers wondering if the time is right to market their business. Some have taken things as far as they can and need help to get to the next level. They see value in de-risking while keeping a piece of the pie and staying in the game. Others want to roll the dice and see if they can continue to grow organically. Some worry about consolidation and new tech and others see all that as a fad.

Everyone wants roll ups.

The decision as to what to do in the face of all the activity in today’s market is deeply personal. It’s always a good idea to start with what one knows to be true -and that is that more information is better than less.

Every business has a ‘why’. Our ‘why’ is that we love to help family-built businesses do what is best. We want them to maximize the value of their life’s work and ensure that fairness and current market driven commercial reason prevails when it comes time to sell or seek an investor. We’re happy to hear from folks seeking our help -whether that means business for us or not.

-Howard Turk