Jeff Doble, Chairman and Founder of Dexters, explains how a streamlined, fast-acting strategy has shaped Dexters through more than 60 acquisitions during the last eight years.
Dexters is London’s largest independent estate agent. With annual revenues of £87.1m in 2018, it’s set to exceed £100m in 2019.
“After doing our first acquisition, I saw how we could quickly enter new markets this way”.
Jeff Doble, Chairman and Founder, Dexters
Dexters was founded in 1993 and we made our first acquisition in 1999. Just after completing that deal, there was a moment when I thought, “I can do this. I know how to build this business.” I understood how to run an acquisition from start to finish and saw how we could quickly enter new markets this way.
Not long after, I sat down and wrote a 15-year strategy to make us the leading Estate Agent in London, and to do so through an acquisitions strategy. That was a big call at the time as we had an annual turnover of £1.5m and four offices in Richmond Borough. However I knew that the lettings business was taking off, that London was one of the most exciting cities in the world, and that it was dominated by small – often one-office – businesses, and so ripe for consolidation.
By focusing on the leafy, attractive parts of London the plan showed us a clear pathway to buying lettings agents in those areas and building a business with over £75 million in annual revenues across the next 15 years. I actually recruited someone to help me run the business off the back of that plan, and in 2014, we pulled that original plan out of a drawer and our annual turnover was within £1,000 of the £75m we had predicted. We sat there and thought, “Well, there you go – stage one, job done!”.
Identifying the right acquisition
We look at six to eight targets a month and have done, on average, one deal every six weeks during the past eight years. We do this because we have become so efficient at running the whole deal process and because there is still so much opportunity to grow through acquisitions. While this has been a highly successful strategy for us, there’s no question that doing deals can be a distraction. In response, we’ve streamlined the process as much as we can and given some people full-time roles to run this for us. We have an in-house lawyer who plays a vital role in all acquisitions, while one person works full time looking for new targets. Our CFO runs our acquisitions day-to-day and I make sure I meet the people involved at the outset.
We only look for businesses that want to sell. That way, we know we can get a fair price. We also analyse the geodemographics of an area, such as the size of the population centre, transport links, how green and leafy it is. If there is strong demand to live in a certain area, then that’s somewhere we’ll try to be.
It’s important that we buy businesses offering the same type of service, targeting a similar customer profile – which is one of the reasons we focus on London, and not nationwide.
Doing the deal
Once we’ve settled on the target, it’s important to act as quickly as possible. This minimises the anxiety that staff in the target company will feel. Also, given the average business we buy is one or two offices, if senior management spend 3-6 months haggling over a deal with us, that’s a lot of time not running the business – and this will mean the business we’re buying is in a much worse state than when we first approached it. If we can’t complete a deal within three weeks, we won’t do it.
We now know, with more than 60 deals under our belt, that we can do a deal of nearly any size in this time. If it drags out longer than three weeks, this will generally mean there is either a problem with the target that could hurt integration or simply make it less valuable than first thought, or that they are less keen to sell than they appeared. We always say to people, we're not trying to buy things cheaply, but we have a process, and if it doesn’t fit that it’s likely we won’t be interested. Some of this has come from experience, but the most important thing is to keep it as simple as possible. We always buy with cash which makes our due diligence straightforward.
It’s important for our team to be able to put themselves in the selling company’s shoes. There are always two sides to every deal and you’ve got to understand what the other person’s motivation is. You have to be able to see their problems and show them how to solve them. In almost every deal I do, I know more about the seller’s financial situation and likely tax burden than they do.
“In almost every deal I do, I know more about the seller’s financial situation and likely tax burden than they do.”
Jeff Doble, Chairman and Founder, Dexters
Integration and our culture
I like to do a deal as quickly as possible and the same goes for integrating new people. It’s important to remove the fear of the unknown, so we always look to complete a deal on a Monday or a Tuesday so that people aren’t worrying over a weekend. We can also get started on integration the same week. The relevant Director in the business will be responsible for the new business as we integrate it, and our support functions – Marketing, HR, IT, Finance, etc – all play a standard and efficient role in the deal process.
New people are given a list of the things that will change on the first day we go into a business after completion. We want to retain the strengths of the business we have bought, however, there are a number of things that will inevitably change. We can’t have 100 different ways of doing the same job in the business. We have a strong culture and a Dexters way of working, and will at some point rebrand that business under the Dexters brand., Some acquisitions have been amazed at how people from right across the business all have the same message. The MD of one recently acquired business said it was like business speed dating! She had met about 40 different people in the first few weeks after being acquired all showing her how we support the front offices.
Our front offices are by far the most important part of our business. It’s crucial that colleagues in our offices have local expertise and knowledge, otherwise we can’t do a great job for our clients. This is certainly true of the businesses we buy. For example, two years ago, we bought a business in Hampstead which is a part of London with a very unique culture, and therefore you need people that know their way around the area. We bought a business which has got 50 years of history and 50 years of data, and it’s crucial that we retain that, and so many of the people that have worked there for many years that can put all that knowledge to good use.
Surrey, you've gone too far
The one time that a location hasn’t worked for us was when we ventured that bit further outside of London. We opened an office in Surrey that was successful but just didn’t fit with our culture and the rest of our business. The clients and the properties were not quite the same that we dealt with in the rest of London and it meant that our model wasn’t best set up to support it. We ran the business for about three years and then sold it to a competitor. It’s still there and doing well, nowadays it would work for us but back then it didn’t fit well.
Otherwise, however, we’ve made a success of all our acquisitions. I am immensely proud of our people and the way we have a built a business through a strong acquisitions strategy that puts customers first.
Jeff Doble lives in south west London and is married with three children. A keen skier and golfer, his free time is spent on the piste or the fairway.
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