Conveyancing is a numbers game

THREE major players in the conveyancing sector tell Australian Conveyancer why M&A is on the mind of businesses and sole traders who are dealing with a perfect storm of pressures. The latest Special Report finds out why consolidation and economies of scale are top of mind for many firms fighting for a fair share of the property transaction pie as they tackle ever-increasing legislative burdens.

THE conveyancing sector looks poised for consolidation as fast-growing industry players go on the hunt for merger and acquisition (M&A) targets across the country. 

Several high-profile conveyancers said they were on the lookout for M&A opportunities amid a spate of deal activity in Australia’s legal sector, including the high-profile merger of Gadens with  Canberra-based Trinity Law and Thomson Geer’s takeover of Perth-based Tottle Partners. 

Jared Zak, managing director of Sydney-headquartered Dott & Crossitt, said he was mulling  M&A after a period of strong growth at the firm, with trade up 20-30 percent year-on-year. 

“We’re definitely keen to acquire some more businesses and bring them under the banner,”  Zak told Australian Conveyancer magazine. 

“The market is pretty ripe for it now, it’s hard to be out on your own as the sole practitioner – that’s what I’m hearing on the ground. 

“There’s so many headwinds with rent prices going up and wage demands and that kind of  thing, so it pays to be part of a bigger organisation.”

Zak said the firm, which itself was acquired by property technology firm LocalAgentFinder  earlier this year, used a business model that helped when it came to expansion. 

“We bought a couple of businesses recently where we’ve bought the business but they (staff)  have stayed on as a salaried employee but under a micro business of their own,” Zak said.

Founded in 2014, the firm operates a franchise network of more than 40 licensed conveyancers  and solicitors across nine offices nationwide. It is the biggest operator in NSW by transaction  volume, according to the MD.

Zak said Dott & Crossitt’s position as a market leader had been assisted by recent push into  Victoria and Western Australia where the firm was seeing “a fair bit of growth”. 

The West Coast, in particular, was a “booming market at the moment”, the MD said. “It’s a function of the housing market, I think maybe there’s still a fair bit of yield there in terms of those houses, whereas if you read the headlines house prices don’t have too much further to go upwards in the eastern states,” Zak said.

“The first six months of this year have been crazy, extraordinarily busy, in what is seasonally a  very quiet time.”

In Brisbane, Colwell Conveyancing Group is also on the lookout to make acquisitions and is  targeting smaller firms in Queensland, according to managing director Nicholas Gould.

Colwell, which was established in 1972 and has offices in Brisbane, Sunshine Coast and Gold  Coast, was in a good position to pursue M&A after a surge in growth in the last 12 months. “We’ve been experiencing significant growth which is fantastic,” said Gould, who pointed to developing strong business-to-business relations as a key to the firm’s recent success.

Unlike Dott & Crossit, Colwell, which uses a team of nine, wants to stay focused on the  Queensland market, which Gould said was part of plans to grow “in a way that’s sustainable”.

“This is a market where we have great relationships with referrers, great relationships with  clients and we’re really sticking to that piece at the moment,” Gould said. 

“We’re not trying to grow too big and too broad and be all things to all people – we’re really  focusing on doing one thing, doing it well, and doing it in a market that you know.” 

Looking ahead, he said there were looming challenges for the industry that could disrupt some  operators, and prompt consolidation. 

“I think there’s going to be some significant changes in our industry with the roll out of the  changes under the new property law act, we’re going to see the implementation of the vendor  disclosure scheme, I think that will be interesting for our industry,” the MD said. 

“I think those who are utilising technology will be well ahead of the rest to implement those.” Planned regulatory changes could also have an effect, Gould said, pointing to the introduction of stricter anti-money laundering and counter-terrorism financing rules. 

“They will be some of the biggest changes to our industry that we’ve seen in decades,” he said. 

In Victoria, Skilled Conveyancing CEO Trent Taylor said he planned to make one acquisition per year and was on the lookout for targets in Victoria, NSW and Queensland. Taylor, who took over the family-run company 18 months ago, said inorganic growth got put high on the agenda after a year spent revamping the firm.

He said it has already made one acquisition – a firm in Ballarat – which meant Skilled now has a  presence in most of Victoria. 

“We bought a great little firm in regional Victoria and took on the principal and their owner and  it’s just gone awesomely well,” said Taylor, who uses a team of around 10. 

He said the firm was on the hunt for firms, especially those in NSW, that were looking for a  suitor and was currently working on “creating a few models on how I can do that with them”. 

“I’m aware of eight or nine different purchases and what people get for their conveyancing  companies is just horrific so I’m working on a model where people can merge with us and be  part of our family,” he said.

One option being explored was to strategically invest in a number of small firms and leave  owners with a minority equity stake, he said.

“They’ll leave some equity in and my plan is that in five years’ time that equity that they’ve left  in is worth more than when they put it in initially,” Taylor said.

“The whole focus is just to build the business, I want to serve those regional communities, I’m  regionally based so I would like to do more of serving the local people.” 

Also key, he said, was keeping the “wisdom of the more experienced operators in the industry”. 

“Consolidation has been happening across all industries for the last two decades in a serious  way, and when larger players outside of this industry decide to infiltrate our industry, the real  danger is the personal touch and care is not as valued,” he said. 

“(Then) the pricing of our services becomes a race to the bottom as they only chase scale.” 

In Taylor’s view, creating awareness about the benefits of “pure conveyancers” among property  professionals and mortgage broker industries was critical for long-term industry health. It was important to show that conveyancers could do transactions “better than anyone as it is  our full time focus and how we can work as a trilogy with our clients”. 

He said conveyancers should be seen as not “just as service providers, but as confident people who charge what they are worth, for the work they do”.