Hundreds of branches and thousands of staff are at risk if the proposed “merger” between Countrywide and LSL occurs. Yet again, it’s the poor staff facing uncertainty and the possible threat of redundancy due to the incompetence of those at the top.
It was interesting to hear of it described as a merger, at least initially. I’d say it’s more like an LSL takeover as it’s the stronger business.
The real value in both businesses isn’t the agency side of things – it’s the surveying businesses with LSL’s e.Surv being the largest in the country and consistently profitable. Financial services in both businesses are strong too.
Should a merger (or takeover) occur it stands to reason that there will be a massive reduction in branches, especially where they double up. Perhaps a franchise operation under LSL’s branding will be the new business model.
Neither business is renowned for running super-profitable EA businesses so the fact that discussions are happening could be seen as a panic move, especially from Countrywide given the failure to complete the sale of Lambert Smith Hampton which was badly needed to pacify lenders and shareholders. The due diligence on pipelines and valuations will only benefit both their advisers.
At LSL, last year’s reduction of Your Move and Reeds Rains branches means that it’s a shrinking business, not a growing one.
The share prices for both companies sit around the 340p mark – LSL’s has been rising for some time since hitting a low in August 2019 at 190p, though Countrywide’s had been 350p in the New Year after undertaking a share consolidation when it hit 7p under its previous method of calculation.
My view is that the merger/takeover is too big a mountain to climb and, to mix metaphors, will leave egg on the faces of both boards.
It will also frustrate lenders and shareholders with no thoughts of the brilliant staff in both businesses.
* Paul Smith is CEO at Spicerhaart. His weekly column follows
Comments (14)
Both of these companies have been victim of poor management just like a lot of the corporates.
The old guns needs to step aside and let the younger and more dynamic Estate Agents show their worth.
Countrywide is a brilliant business or at least it could be.
LSL is a bit archaic. Chris Watkins makes a good point about franchising.
Whatever people may think of Paul Smiths comments ,valid or not, the case in point here surley is that Countrywide were doing alright before they embarked on the ridiculous strategy of Half Online/Half Traditional agency.Was this not the real sratr of the rot.Where are the people who orchastrated this ? One is on the Board of Tescos ! the other side kick (Phone lady) -god knows. And who at Countrywide allowed this to happen or have they all gone-therin lies the answer. IMO.
FYI. There were indeed plenty of people who disagreed with the in-sane ‘ half-online/half traditional agency ‘ model which was hastily pushed through and even more hastily rolled out initially to a couple of subsidiaries and then a few more ‘ on the drip ‘ which said it all really because if the powers at CWD House thought it was a winner then why not roll it out across the whole group straight off? It was their attempt to counter ‘ the threat from PB ‘ believe it or not. A total disaster and cost the Group I heard over 6m quid before it was quietly dropped. Those that disagreed with their on-going strategy either left ( me ) or were pushed out via a mass cull of the number of subsidiaries with ( mostly ) the best MD’s ( mine included ) shown the redundancy door just prior. That together with paying eye watering prices for Lettings books with borrowed money at the top of the market led to losses of 100 million plus and no-one left at the top table who knew what they were doing to steer the ship. It know looks like that ship is about to hit the rocks. What a crying shame. In answer to your question on who remains from the appointment of Mrs Platt ( who having only met her once seemed a nice lady ) only Mr Long a qualified accountant I believe.
Always good to see young Paul comment. He doesn’t have to or need to but guess he feels from his agency family heart he can’t help but to or he’s keeping his name in lights re recruitment as he clearly sees platforms such as this and linked in are read by prospects. That said, I have no idea why I’m commenting on such a boring and lengthy death this time round – the sooner someone relieves the pain of what would now have been circa 5p CWD shares the better and we can all move on. Paul will know, but many don’t, this is not new territory for CWD they went the same way in the 90’s I think they were 40 or maybe 80M in debt when I believe a US Hedge Fund pumped 120M into buying the losses – they were to open High St offices everywhere in a bid to see of Independents as an Independent one didn’t feel one was trading on a level playing field but fair play to them, they were charging a fee of 2.25% in those days and giving a reasonable degree of customer service. In 2007 an Anglo US Hedgefund purchased more equity which allowed them to block a £1Billion sale. So, there we have it, a business that is and has been for some time, all about the £s and one that seems to have lost it’s Harry Hill’s roots of helping people to move both in equity and financially.
Paul Smith clearly runs a decently successful business, but I wonder what good these comments do for him? Doom and glooming about the prospects of CWD and LSL surely only perpetuates investors and potential customers opinion of what could be a dark day for estate agency in general?
I liken it to Northern Rock & Lloyds in the banking world, circa 2008/2009. When they had their troubles, the banks collapsed, because a) investors didn’t want shares in banks anymore, and b) consumers pulled back from borrowing and put plans on hold. So thinking about how that equates to this situation, if a large corporate falls or end up going through the sort of restructure we expect to see, what wider impact will that have on the market? I suspect the legion of excellent independent agents will crack on undeterred using their local networks and nouse to make deals happen, however, with the massive spend on support staff and marketing, will the corporates have the same ability to withstand a storm?
Firstly, those that invest in listed companies or who provide capital for major national non-listed companies like Spicerhaart, won’t want to put their hands in their pockets anymore, and asset managers and lending streams will be reluctant to extend the borrowing that the big corporates have had in the past, as with a CWD/LSL merger and asset strip, plus the poor performance of PB and all the negative publicity surrounding them at the moment, you’d be mad to invest wouldn’t you?
Secondly, Haart owe a huge amount of success to their farming of Countrywide’s ex management structure. They have appointed dozens of directors, regional managers, branch managers, FS directors (particularly in the self employed division where ALL of that team ar ex-CWD) and other senior figures from Countrywide over the last 10 years or so. They haven’t developed their own talent during that time, and with a CWD coming out of the market, Haart are going to need to drastically improve their own internal training and succession planning or they won’t have anyone to poach in three years time. Who will fund that development and training, bearing in mind the investment in point one is now more……?
Thirdly, they have built a huge business off the back of new homes sales (partly because as above, they took all of Countrywide’s uber successful L&NH team from around 5 years ago). How will comments about other high street agents demise assist their New Homes BDM’s in obtaining new stock? Surely, a simple google of Spicerhaart will only serve to make it easier for a Belway/Bloor/Persimmon etc to just say “you know what, we’ll market them ourselves…”
I for one hope CWD and LSL recover and make good. I would hope Paul Smith and his army of directors who have been posting all over linked in this last 48 hours about how “you can find a role with us if you’re affected” have more important fish to fry than making their own self indulgent public service announcements. In the meantime, it’s a great time to be in independent agency and the associated off shoots.
It speaks to the character of the man I’m afraid.
“My view is that the merger/takeover is too big a mountain to climb and, to mix metaphors, will leave egg on the faces of both boards.”
Let’s not beat about the bush .This merger has arisen because the banks have lost patience with the BODS at CWD. Any confidence that they can negotiate a good deal was finally thrown out of the window with the proposed sale to JB Moeller
You really couldn’t make it up. LSH cutting high end investment deals everyday for clients whilst the BODS agreed a deal with someone whose only UK directorship is of a company in liquidation and an outstanding charge.
First rule of thumb make sure the buyer has the moolah before agreeing a deal and now a potential £3.5m abortive costs bill .
Shareholders deserve better .
Not only did the deal fall down but the BODS agreed to reduce their credit facility from £125m to £95m on the strength of it
Now backed into a corner with their back to the wall .No wriggle room
I wouldn’t be surprised it the CWD BODS have been excluded from negotiations This is a merger borne out of necessity not synergy
and CWD shareholders can expect another hammering
The BODS at CWD have wrecked shareholder value and the company every step of the way. £10k worth of shares when Long took over as chairman in early 2016 will be worth less than £500 today
Furthermore those suckered in to the capital raise in 2018 to support Back to Basics had injected a further £10k then that would be now worth less than £7,000
Foolishly bought revenue with borrowed money which disappeared ,bad recruitment and even bought in their own shares on the way down
Allt the BODS had to do was turn up and sit on their hands and let the brands get on doing what they were doing best without interference .
Branches which had been profitable for decades now reduced to shadows of their former selves .
A sad story indeed
I cannot see anything to disagree with here. You certainly have some very detailed (and presumably inside) information. There was a time when CWD scared the competition but they are now just a soft blubbery laughing stock – harsh but fair.
Like PB these old, once profitable, businesses are DEFINITYLY in the sell, rather than buy file.
No inside information ,just observing All the facts are there in the RNS
Never really understood the sense in borrowing money from the bank to pay huge golden goodbyes to senior partners shortly to leave the premsies in the vain hope that their past success hangs around in the floorbaords All the figures are there in the RNS
Still….. nobody on the CW BODS has experience in property whether asset based (eg Land Secs) or agency apart from one lady who used to run HR at LSL. Ahhhh – I get why they hired her now…..
HillofWad is right in all things here except that goodwill purchases can work if well selected and well managed- LSL has done a good job with Marsh and Parsons and the original Hamptons deal by CW was a good one.
I agree Hamptons was a well timed purchase . The story with Hamptons is a little different they were acquired by CWD in 2010 at a bargain basement price not at the peak of the market when Emaar in 2006 bought them for £104m
Significantally less almost a distressed purchase
The original pacesetters ,retiring partners had long gone having already collected Thanks for the cheque and Goodnight Irene
The CWD BODS had since been buying outfits at peak of the market prices Capital sums shelled out based on a multiplier of the 3 best years
LSL are huge fans of the franchise model – maybe we could return to the days of Bairstow Eve’s franchises and many people will keep their jobs? Who knows – only time will tell
Why not run your own business better and get everyone saying positive things about SpicerHaart before commenting on CWD and LSL. They’re not good agents overall, a lot of us independents know that, but SpicerHaart aren’t a pillar of vertue either. Glass Houses springs to mind!
I think it is important someone who has the largest independent estate agency in the UK, who are independent through profitability, is able to express an opinion? I imagine a lot of those that will no doubt end up losing their jobs if Countrywide is taken over by LSL will be glad Paul Smith has a successful business, as they will perhaps have the opportunity to secure employment with Spicerhaart moving forward.