Here’s what comes next in the Compass-Anywhere deal

Antitrust regulators and shareholders in Compass Inc. and Anywhere Real Estate Inc. must still sign off on the companies’ merger plan^[1], which isn’t expected to close until the second half of next year.

If Compass does pull off the plan to acquire its larger rival Anywhere for stock valued at $1.6 billion, the combined companies will command a market share of 18 percent, UBS Analyst Chris Kuntarich estimates.

Antitrust regulators at the Federal Trade Commission (FTC) and Department of Justice scrutinize the impacts that such major deals might have on competition. Under the Hart-Scott-Rodino Act^[2], Compass and Anywhere are required to file a premerger notification and wait for government review.

There are “two major consumer concerns” with the deal to bring brands including Better Homes and Gardens Real Estate, Century 21, Coldwell Banker and Corcoran under the same roof, said Stephen Brobeck, a senior fellow at the Consumer Policy Center^[3].

Steve Brobeck

“When two of the four mega-companies in the residential real estate market merge, one worries that they will increasingly use their clout fo disadvantage smaller competitors, effectively limiting consumer choice,” Brobeck said in a statement to Inman. “Consumers should also be concerned that Compass will use its superior clout within the new company to pressure Anywhere brands to promote private listings, thus eroding market transparency for home sellers and buyers.”

Acquiring Anywhere “increasingly gives Compass the ability to deny timely listings to real estate portals,” Brobeck said.

Given the fragmented nature of the real estate brokerage industry, regulators might allow the waiting period to expire without weighing in — as they did when mortgage lending giant Rocket Companies acquired Redfin, a national, tech-forward real estate brokerage July.

Five senior Democrats voiced concerns to antitrust regulators^[4] in June over Rocket’s plans to acquire not only Redfin but Mr. Cooper, the nation’s largest loan servicer.

Rocket succesfully portrayed^[5] both deals as wins for consumers. By unifying home search, buying, selling, mortgage, title and servicing, Rocket executives claim they’ll be able to cut consumer transaction costs by half, to $20,000.

Compass executives made a similar argument on a Sept. 22 investor call^[6] — that a merger with Anywhere will benefit consumers.

Robert Reffkin

“Once we have integrated the 340,000 real estate professionals on our platform, we will have the ability to further our goal to help agents save time, be more productive and for home sellers and home buyers to benefit from more insights and connectivity within the platform,” Compass chairman and CEO Robert Reffkin said on the call.

Compass Chief Financial Officer Scott Wahlers said the deal will allow the combined companies to slash $225 million in expenses within 3 years by realizing “cost synergies.”

“Both Compass and Anywhere have been successful in implementing cost-reduction programs over the last few years,” Wahlers said. “And now by combining the operating expenses of the two companies, we’ll have renewed opportunities.”

There “will certainly be vendor consolidation to achieve more favorable pricing with higher volumes,” Wahlers said. There will also be opportunities to consolidate higher-priced office leases of the combined title and brokerage operations.

Both Compass and Anywhere operate mortgage joint ventures with Rate^[7], and the merger “will allow us to quickly consolidate our mortgage JVs, providing a higher attach opportunity with a wider footprint of loan officers across the country, while at the same time providing for expense synergies as we consolidate the mortgage entities,” Wahlers said.

Once the Compass and Anywhere notify antitrust regulators of their intention to merge, they must wait 30 days^[8] — or until the agencies grant early termination of the waiting period or issue a request for additional information. Either the FTC or the Department of Justice will conduct the initial review.

Rather than blocking a merger outright, regulators sometimes require remedies that are intended to preserve competition.

When Intercontinental Exchange Inc. (ICE) acquired rival Black Knight in 2023, it had to agree to sell Black Knight’s Optimal Blue and Empower businesses^[9] to subsidiaries of Toronto-based Constellation Software Inc.

While Compass and Anywhere’s boards of directors have signed off on a merger, the deal remains subject to approval by shareholders in both companies. Mega mergers often generate lawsuits contesting deal terms^[10] on behalf of shareholders.

Many Anywhere shareholders were undoubtedly happy to see the company’s price per share climb 45 percent^[11] Monday. But Compass shareholders saw the value of their shares tumble by 16 percent^[12].

Under the terms of the deal^[13], Compass will not only provide Anywhere shareholders with $1.6 billion in equity in the merged company, but take on $2.6 billion in Anywhere debt, valuing the transaction at $4.2 billion.

Anywhere is not only the bigger company — with about 300,000 agents to Compass’ 40,000 — but has a bigger presence in title and escrow. The addition of Anywhere’s title operations across 30 service areas will give Compass a national presence in title.

“By adding over $1 billion in revenue from ancillary services such as title, escrow and relocation services as well as franchise revenue, we will be able to diversify our revenue mix with higher margin and more recurring revenue streams,” Reffkin said.

Assuming the deal closes, Compass plans to continue operating Anywhere’s company-owned brokerage brands — Coldwell Banker, Sotheby’s International Real Estate and Corcoran — and franchise brands Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Corcoran, and ERA.

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Email Matt Carter^[16]