The ‘merger’ between easyProperty and the Guild of Property Professionals and its sister brand Fine & Country has been described as either “an unholy alliance or a godsend”.
The deal, touted as being worth £60m, is set to finalise next month and has now been scrutinised by proptech experts Eddie Holmes and James Dearsley.
The pair claim the deal “could eventually be seen as one of the worst knee-jerk responses by a traditional firm to the threat of digital transformation”.
Looking at easyProperty, when it launched it promised “big things”, say the pair.
It promised a profit in the year to last September of £2.9m based on a turnover of almost £24m. However, it recently announced a loss of £11.3m on a turnover of £875,000 in that period.
The company had expected to be listing 4,000 to 5,000 properties each month by 2016: “Two years later, the reality is around 80 properties per month.”
Then there was the ‘funeral’ parade stunt in London, marking the ‘death’ of high street agents.
But what of the deal itself?
Holmes and Dearsley allege: “We have it on good authority that the deal rests on the release of approximately £15m cash by Tosca Fund (one of the main backers of easyProperty).
“Of this, we are told that the vast majority has been used to buy out Guild shareholders, leaving a smaller proportion available for operational or marketing costs associated with easyProperty
“This begs the question – why is the transaction being described as a merger if it is in effect a purchase of the Guild by easyProperty’s main funders?
“The organisation structure put forward by the Guild certainly shows this to be the case.”
The pair also say that when Tosca invested, easyProperty was valued at £78m: “Therefore this deal has slashed 70% from its ‘value’. Astonishing.”
Holmes and Dearsley say that for Rob Ellice, founder of easyProperty, the deal is a salvage operation; for Tosca, they claim it is a “Hail Mary” salvation attempt to rescue some of their initial investment.
And for the Guild, they say it is seen as a defensive move against the rise of online agents, as opposed to the option of standing back and doing nothing.
Holmes and Dearsley describe the rationale for the deal as “driven by desperation”.
Describing the disparity in brand values, they say that easyProperty’s are about value, volume and taking on the big boys.
Fine & Country – currently promoting polo events – is about prestige, money and lifestyle.
Holmes and Dearsley say it is “unfathomable” how the difference can be turned into a workable strategy for Fine & Country agents.
The pair conclude: “All things considered, we therefore doubt that this transaction is likely to deliver either outcomes of a successful digital transformation for the Guild or help easyProperty find a sustainable business model.
“One rider, however. The project is under the stewardship of a well respected and experienced agent, Jon Cooke. It will take someone of exceptional ability to pull this project off.”
This is a fascinating analysis, with more here: