Find out what companies are searching for when looking to expand and how business changes post-transaction.

A combination allows for different options to be pieced together—a way of finding the best partners. But some combinations are more than that, they are also additions that round out a specific approach or business idea. 
The talk of the industry has gone away from what many say is the basis of multifamily housing. Buzzwords such as artificial intelligence and machine learning among others have been around for decades, but the push from the pandemic has caused a momentary fog. Relation-ships are the foundation of the rental housing industry, whether that’s between residents and staff or community owners and supplier partners, or any other com-bination.

Finding the Right Partner

“Madera has always believed that success in business starts with relationships. This is why we always focus on win-win situations for all parties involved,” says Dave Marcinkowski, Partner with Madera Residential. “As we look to rapidly expand, it will be all the relationships our two groups have spent our entire careers fostering that will lead the way,” he says, referring to the recent Madera merger with fellow Texas-based multifamily investment firm WayMaker.

This collaboration is one example of a combination addition. Marcinkowski likened it to a 1+1=3+, where more was brought to the table than just a simple combination of two business models.

Ryan McGrath, CEO and President with Asset Living, says reviewing company values is a first step into a potential transaction. “As CEO, nurturing and reinforcing our company culture is a significant aspect of my responsibilities,” he says. “I firmly believe that the essence of any business lies in the values upheld by its people. I find that it’s imperative that the individuals brought together through a business transaction share coherent core values. Neglecting this aspect can significantly complicate the integration process.”

Asset Living recently acquired three management companies to expand to more than 285,000 units in the U.S. The new growth has given the company the opportunity to increase employee count to more than 8,500 as well as provide additional career development options and career paths for new talent. 
Dawn Waye, Chief Operating Officer with Edison Equity Residential, says there are certain items to review when partnering with another firm. “First and foremost, integrity and synergy of the organization we were joining. Relationships matter. Second and equally important is the culture that our associates are going to be joining, and finally the financial stability of the organization.” Asset Living acquired City Gate Property Group in late 2021. Waye co-founded the former Dallas-based management firm in 2014 and was President at the time of the transaction.

“The partners of WayMaker possess very unique skills and talents that fit perfectly into areas Madera needs. This merger simply formalizes a lot of what was already going on with our previous partnerships. We all strongly believe that with all the economic challenges we all face today that it will create a number of buying opportunities all across the country. This merger will bring together an incredibly talented and experienced team to capitalize on these opportunities.”

This was a unique situation for Marcinkowski and company, who has been long-time friends with Keith Duncan, one of the founders of WayMaker. “I was so excited and proud of Keith for stepping out and founding Waymaker,” says Marcinkowski. “I was even more excited when Keith called me about partnering previous partnerships. We all strongly believe that with all the economic challenges we all face today that it will create a number of buying opportunities all across the country with them on their first apartment deal in Dallas. Our shared values made partnering on that first JPI deal extremely easy. Our shared vision led to us expanding that partnership to nine JPI deals valued at over $1 billion in 2022. This partner-ship based on values and vision has only grown to where we felt it was the right time for our two companies to come together under the Madera banner.”

Despite the familiarity and a previous transaction, there are challenges that happen in the M&A process.

Challenges

Challenges are inevitable and can stem from a difference in company values and vision. Company culture is important, and so is the purpose of company growth. It’s vital to have a reason behind the growth rather than growing for the sake of it, says McGrath. Potential solutions stemming from challenges include new locations, enhancing technology and improving business services. Other effected areas include culture integration, technology and IT process overlap and client relationships.

There are many areas of a business that are impacted, says Waye. “Organizational structure of the small company needed to align with the hierarchy of the larger company to assure smooth integration and reporting lines,” she says, refer-ring to the acquisition by Asset Living.

“Challenges arise when expectations aren’t clear,” says McGrath. “To ensure clarity on both sides, we use an extensive integration process. We also recognize that every company is a living, breathing organism—in other words, no one company is the same. We have a format, but know it needs to be adapted for every transaction. In the end, integration is not one way—the acquired company is changing but so are we. Our collective duty is to ensure that change is positive for everyone.”

As previously mentioned, one of the biggest impacts to company culture and employees during and after an M&A is career progression. “One of the primary goals of our strategy is to create opportunities for our employees’ growth and career advancement,” says McGrath. 

“Through mergers and acquisitions, our employees gain access to a broader spectrum of career paths and person-al development avenues. Embracing change is vital as we navigate through these transitions, and I’m confident that together, we’ll seize the opportunities that lie ahead.”

At Madera, one underlying factor in the most-recent transaction is the addition of Jay Parsons as Head of Investment Strategy with Madera. “Jay is arguably the most known and respected economist in all the apartment industry,” says Marcinkowski. “We could not be more excited about him bringing all that experience and talent to Madera’s investment strategy. Jay has been pointing out for a while now how exciting of an asset class attainable housing is right now.”

Moving Forward

While Texas will always be home for Madera, this most recent transaction gives the company the ability to look across the horizon for an expansion opportunity outside the state and in the Southeast. McGrath says their growth revolves around their success, and everything is based on that. “Our growth strategy, both now and in the future, revolves around empowering our clients to achieve greater success,” he says. “Ev-erything we undertake is geared towards this goal, whether it involves expand-ing geographies through mergers and acquisitions, introducing new services, opening new markets organically based on client requests, or investing in data and technology.”

 

Michael Miller is NAA’s Managing Editor.