S
teve Murray, a respected expert on residential real estate trends, sounded the alarm about trouble brewing in Tennessee's market. An upstart brokerage was poaching employees from Parks Real Estate, the state's largest firm, which Murray had recently helped sell to Compass. The culprit behind this raid was none other than Bob Parks, the founder of the firm being targeted. Murray described his relationship with Parks as strained after he wrote a scathing note criticizing Parks' conduct.

    This drama in Tennessee is an anomaly amidst Compass's otherwise successful year of expansion through strategic acquisitions. By snapping up local firms, Compass aims to grow its headcount and transaction volume. According to Murray, M&A is crucial for national companies like Compass, which face high expectations for growth and struggle with one-at-a-time recruiting.

    Compass's acquisition strategy has already yielded impressive results. The firm has invested over $47 million in cash and stock into two deals this year, including the purchase of Latter & Blum, a major Louisiana-based brokerage. These acquisitions have contributed significantly to Compass's transaction growth, with revenue increasing by $460 million over nine months compared to the first half of 2023.

    Latter & Blum has seamlessly integrated into the Compass ecosystem, and its leadership remains intact. The company's CEO, Lacey Conway, attributes this success to Compass's appreciation for local expertise and its willingness to preserve the firm's legacy.

    In contrast, Parks Real Estate has experienced a significant brain drain since being acquired by Compass. Former CFO Jenni Barnett joined Bob Parks in founding Onward, a new brokerage that has attracted over 300 agents who did close to $2 billion in volume in its first 90 days of operation. Many top producers have defected from Parks to join Onward, including Susan Gregory, the top individual agent in Tennessee.

    Gregory and other departing agents claim they left Compass because it failed to understand their local market expertise. They argue that if agents wanted to be with Compass, they would have joined the firm voluntarily. Despite this setback, Compass remains committed to its acquisition strategy, with a strong pipeline of targets and plans to expand into new geographies.

    While the defections from Parks haven't hindered Compass's growth numbers, they do highlight the challenges of integrating local firms into a national brand. As consolidation continues in the real estate industry, it's likely that more agents will seek out independent paths, as Wendy Monday, another departing agent, noted.