Trends of the last decade
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Narrator:
There has been tremendous amount of aggregation of brokerages over the last decade. ILSTV spoke with John McArthur, the Chairman of AMAC Consultants Inc., to find out what events inspired this trend.
John McArthur:
As far as brokers are concerned there has been a tremendous amount of aggregation of brokers in the last decade. My previous partner and I founded AMAC. The typical well-run brokerage changed hands for 1.5 times plus or minus the tangible assets. Most of the work we did initially, we did for vendors, retirement age brokers who were interested in realizing on their asset. Then the consolidators started rampaging across the country. Equisure Vector, Canada Broker Link, Hub – which was a different sort of consolidator. It got to the point where it was almost impossible for us to obtain listings because we would call a broker who had been interested in selling and he would say, "Well John, why would I pay you a commission? I’ve had three calls this week from people who want to buy my business." And then regional brokers started to become frustrated because they were being shut out – they weren’t getting the opportunity and they started retaining us. Over the last eight years most of the work we have done has been on the behalf of purchasers. That is starting to change – we recently picked up a few listings but over that period of time we acting for purchasers and the price buoyed up from 1.5 times to the range of 3 times and we had also seen here in British Columbia the price of Autoplan licenses increase from around $75,000 to I hear the most recent sale was $670,000. So one wonders with the economic downturn – the credit crisis, the fact that despite the federal bank reducing interest rates, they are actually bumping their previous acquisition loans a point and a half above prime where they originally had the loan fixed. They can do that because it’s a promissory note and they just say, "We have some good news and have some bad news. The bad news we’re calling your note, the good news is we can replace the facility but we’re going to replace it at a higher interest rate."
