Why rightmove should acquire propertyfinder
November 12, 2008 by Simon Baker
Times are tough in the UK market at the moment and it seems to me that the best value creating play would be a merger of rightmove and propertyfinder and therefore increase the gap between rightmove and the rest of the market.
This article follows up on our exploration of consolidation options in the UK market.
So lets explore the logic around why this move could make sense.
rightmove.co.uk is the clear market leader in the UK. According to ComScore it had 2.4m UV’s in September – 1.1m or 84% more than second place propertyfinder.com. However it is coming under pressure from a variety of sources including agents who are either ceasing to trade, other agents who are finding paying the monthly subscription challenging, and from the new age competitors who are offering free advertising models.
propertyfinder.com is the second most visited site in the UK and along with its sister sites of hotproperty.co.uk and ukpropertyshop.co.uk, has solid traffic in the market. According to ComScore, in September the propertyfinder network (propertyfinder.com (1.3m), ukpropertyshop.co.uk (0.4m) and hotproperty.co.uk (0.3m)) had 1.7m UV’s.
From a rightmove perspective, the acquisition (it wont be a merger) of the propertyfinder network makes strategic sense.
- It could run the two in parallel and therefore claim #1 and #2 spots in the rankings and increase their coverage of the UK market – all for probably a lot less than spending it on marketing. Agents would have their listings on both sites and therefore gain a significant increase in their life blood – leads.
- It removes the threat of the propertyfinder network merging with The Digital Property Group (findaproperty.com and primelocation.com) and therefore creating a true threat to rightmove.
- The time is right on pricing. rightmove has money in the bank and the prices of these sites are not increasing, but decreasing. rightmove and the REA Group are both off significantly from their 12 month highs.
- If the deal was done for equity, rather than cash, and therefore the REA Group and News International ended up with equity in rightmove (probably a small stake), then News would be faced with a challenging question about who to truly back – rightmove.co.uk or globrix.com.
From a REA Group / News International perspective, the deal also makes sense and would get them out of a difficult situation.
- propertyfinder has lost money over the last couple of years and although it is making head way in the UK market, it does provide them with an out in what has become a highly competitive market.
- This would improve the overall profitability of the REA Group – never a bad thing.
- If they can get equity rather than cash for the deal, then give the depressed price for rightmove stock, they could end up with a sizable stake – maybe in the 5% – 10% range.
Of course there are a number of hurdles to make any deal like this work, but if it could be pulled off, then shareholders on both sides are likely to see their stocks increase in value.
- Zoopla Confirmed as Potential Propertyfinder Buyer
Last week it was revealed that the Propertyfinder's management buy out attempt had failed and that the REA Group and News International had entered into a heads of agreement with a mystery party. This mystery party has now been confirmed as being Zoopla. Zoopla is a relatively new entrant to the UK online real estate market having initially launched a site around home prices and more recently moving into advertising homes for sale in the UK using the pay per lead model. Earlier this year Zoopla closed out a £3.75m capital raising. Check out our coverage of Zoopla over the last year. On reflection, this deal makes sense by providing Zoopla with a boost into being a serious competitor in the market and it gives propertyfinder.com and its team a new lease on life....
- Propertyfinder MBO Fails But …
The much talked about management buyout of propertfinder.com in the UK has failed however a new mystery buyer has emerged. In a late announcement on the ASX, the REA Group & News International have entered into a non-binding heads of agreement for the potential sale of their UK online business. Internal sources say there were three “very detailed and strong bids” however the while the existing management put in a “very impressive bid”, they were not the preferred option. A period of exclusivity has been entered with the preferred bidder so that they can undertake due diligence and the identity of the preferred bidder might be revealed as soon as the end of next week. Given the comment in the ASX release that “if this transaction successfully proceeds to completion, it is unlikely to have any impact on the guidance (already) provided”, the offer being considered is likely to be small. The REA Group and News International have also kept the door open to close the business or just sell the assets to the preferred bidder as they continue the consultation process with staff – a prelude to closure. So who is the mystery bidder?...
- REA Group Considers Closing Propertyfinder
In an announcement to the Australian stock market today, the REA Group said that it was commencing a review of their UK operations. The announcement also flagged a potential closure of all or part of the Propertyfinder business as well as the potential write down of its UAE and Hong Kong assets. They said that the likely net impact on their 2009 net profit is anticipated to be in the range of $26m to $28m. This announcement comes after the recent closure of the UK print operations and rumours circulating that the REA Group had unsuccessfully tried to sell the Propertyfinder business to DMGT and Rightmove. So what is the likely outcome?...
- Could a Management Buy Out Save Propertyfinder?
As reported last week, the REA Group and News International are considering closing Propertyfinder, its UK operations. Since then Nick Leeming, the Founder and Major Accounts Director of Propertyfinder, has been reported as saying that the management team, lead by CEO Gillian Kent, are mounting a rear guard action to save the business by putting together a MBO (Management Buy Out) plan. The clock is now ticking for the Propertyfinder management team as the REA Group stated that the review of the UK operations would last only 40 days. Assuming a plan can be assembled in time, what is the plan likely to look like and could a revamped Propertyfinder be profitable?...
- Will Networks Take on Rightmove in the UK?
Over the last few months networks of property portal sites have emerged in a effort to take on the market leader rightmove.co.uk. Recently The Digital Property Group claimed that it has closed the gap with rightmove.co.uk to just 355k unique visitors. While this may be the case, the question is how effective are these networks for advertisers and are they really taking on rightmove.co.uk or are they just a marketing ploy?...
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Simon
I guess the big question for Rightmove is whether they genuinely believe that the middle tier players such as Propertyfinder and DPG can gain a foothold in the current climate. After 8 years of trying, you would have thought if it was going to happen it would have already. The new free models from Globrix, Thinkproperty and soon Zoomf just create more pressure on the middle tier and arguably make Rightmove more secure in the No1 slot.
Rightmove clearly however have shareholder pressure, they need new revenue streams to enable them to report growth. They can do this in the way you suggest above. They potentially also have other options. Given the low prices of portals at the moment they could acquire a european player to soften the UK footprint. They could also potentially move into a deeper relationship with the estate agent via software or transactional services ( Hips may have put them off the later), but an acquisition of a software business is interesting but only if they get scale.
A loss making business, in a tough market, with disruptive business models starting to increase makes the Propertyfinder valuation somewhat challenging for both parties.
RM + PF would mean that they would further abuse their dominent position and continue to overcharge agents. Agents would no doubt put up with this whilst times are tough (what realistic alternative do they have?) but as soon as the market picks up they’ll leave in droves. Eventual winners would be those sites that help the agents through the tough times ahead = Globrix, Propertylive (if they get their act together) and Zoomf
Simon,
You seem to be suggesting that Property Finder cant survive on its own and has to be taken over. Running the two sites in parrell would just be a waste of time and money.The Digital property group …………. why would they want it, agents dont want to run their properties on several sites , thats why the Globrix model works so well. You can fill googles coffers any time you like to boost traffic but as Thinkproperty found out unless you have the properties for your visitors they dont come back and i would suggest buying a company on the back of its Google spend is a no no. Then there is the REA group which i would suggest is not a cheep option , given they are sucessful outside the UK. ………. no i dont see this taking flight .
“RM + PF would mean that they would further abuse their dominent position and continue to overcharge agents”
In what way is it abuse to profit from massive investment and building an extremely successful business? If you were the only agent in town, wouldn’t you set a charge appropriate to the market?
As to overcharging, it’s a service that massively undercuts newspapers (which don’t work anyway) and affords access to where millions of homemovers are actually looking. Sell 3 houses a year and you’ve covered your costs.
If you pay peanuts for a car, it might well get you from A to B, but it will be unreliable, rubbish to be in and be seen in and will leave you confined to the slow lane. Pay for a Golf and it will provide lasting ownership experience that can be relied on to work and deliver way over and above the basics of bangers.
If £500 odd per month is a massive issue, than the business is probably fundamentally flawed in the first place, and maybe that’s the real issue here; that the confluence of the severe transaction drought and the game changing effects of internet adoption have brought into sharp relief the ananchronism of some of the old ways of doing business…it’s change or die time.
Comments like the last one would only have come from someone at RM still trying to justify there fee. Cheap shit to be fair, we all know back the day £500 is cheaper than the papers but I think you miss the point. Why should agents pay that much money to get no more than they did this time last year? They are well aware that the yes, RM the market leader, but for someone in such a competitive market you seem happy to know agents only for there money to line your own pockets.
An acquisition is out of the question, this is undoubtedly propertyfinders time and indeed as RMoves share decreases propertyfinders grows
Rightmove are reaping what they have sown and agents are now realising they are not to be used to funded growth in Countrywide or Connells brands.
RM are undoubtedly on the ropes and i for one am supporting the propertyfinder network to deliver the killer blows over the coming months.#
Lets stop sensationalising and looking for stories which just are not there#
Lets look at cost and effectiveness and ultimately lead generation results.
Glowbrix are in decline and for a free model that should be setting alarm bells ringing in every agents office. IT IS FREE FOR A REASON NO ONE LOOKS AT IT
WE MAY AS WELL GO BACK TO PRINT SO AT LEAST WE CAN READ IT WHILST WE EAT OUR FISH AND CHIPS
Propertyfinder all the way for us please lowest cost per lead, staff that care and ultimately leads that generate business.Wake up estate agents please and stop looking for freebies THEY DO NOT EXIST
The way Right Moves price is dropping REA should buy them
[...] The operational future for Rightmove is clear. However, the more interesting question is what the business will do strategically. The UK market is ripe for consolidation and Rightmove is in the best position to lead the charge. They should be utilising their cash reserves and cash generating capability to acquire one or more of the existing players in the market. The most obvious targets are propertyfinder.com and findaproperty.com. Either of these two businesses would help protect the current strong market position of Rightmove. In an article last year we discussed why it makes sense for Rightmove to acquire Propertyfinder. [...]
How do you envisage this getting approval from the Monopolies and Mergers Commission (MMC) ?!