Will Regulatory Roadblocks Hinder Compass’s Smooth M&a Sailing?

Compass made waves Monday morning with an announcement that it was acquiring real estate giant Anywhere in an all stock deal resulting in a combined agent count of over 300,000. However, before the deal can close, it will be subject to approval by shareholders at both firms, and federal and state regulators. 

The Robert Reffkin-helmed firm is no stranger to navigating an acquisition alongside regulators. 

“Federal or state authorities have already compelled Compass to divest itself of some of what it acquired when it bought @properties Christie’s International Realty last year, so my first thought here is that they are going to run into the same situation with this deal, just on a much bigger scale,” Steve Murray, the co-founder of RealTrends Consulting, said. 

As Murray sees it, Compass may be forced to divest from some of its acquired Anywhere holdings in markets where it already has a strong presence, such as New York City, Chicago, and Southern and Northern California. 

“My second question,” Murray said, “if this deal closes, they will own both Sotheby’s and Christie’s, and I wonder what federal authorities will have to say about that.”

While Marx Sterbow, the managing attorney at Sterbcow Law Group, understands where the antitrust concerns are coming from, he doesn’t believe this deal will trigger any issues.

“The market is so fragmented, they’re not going to have more than 51% of the total U.S. real estate market,” Sterbcow said. “Maybe in some small markets they will hit 51%, but the reality is, is that the rest of the country will even things out.” 

Sterbcow is confident that the strong presence of other major national and independent brokerages in those large markets like New York City and Chicago will ensure Compass’s new total market share will stay below the antitrust threshold. 

Under the first Trump administration, the Federal Trade Commission (FTC) challenged a few mergers, including the failed acquisition of FanDuel by DraftKings, but the FTC, as well as the antitrust arm of the Department of Justice (DOJ), has been less active during the second Trump administration. 

“By all indications there is very little appetite for antitrust enforcement from the DOJ,” Francis X. Riley, a partner at Saul Ewing LLP., told HousingWire in August. “They just aren’t doing anything. They are letting these mergers go through with limited investigations or limited exchange of information, and this sheds light on the fact that the DOJ is not going to be active in antitrust enforcement actions.” 

Growing pains

In addition to these regulatory challenges, Murray also foresees some growing pains for Compass as it looks to eventually integrate all of the Anywhere agents, brokers and franchisees into its network. 

“This will be among the most difficult challenges any national broker has ever faced,” Murray said. “It will be an enormous task.” 

In any acquisition, Murray noted that there is some movement among agents and teams at both firms who are unhappy about the deal. 

“If I’m a big agent or team at Compass and now we’ve acquired a big Sotheby’s franchise in my market or a big Coldwell Banker Realty team, I might not be happy because I’ve lost that feeling of specialness,” Murray said. “That is a normal challenge, it goes on in every acquisition, but it will entail a lot of effort to keep everybody happy.” 

In prepared remarks during an investor call Monday morning, Reffkin acknowledged the monumental task he has created for himself.

“I want to make clear that I fully recognize the enormity of the integration task ahead of us,” Reffkin said. “And therefore, in the months ahead, we’ll be naming a Chief Integration Officer, and I look forward to sharing with you how these two companies will come together.”