Opportunity May Come Knocking Here

Implications: These two companies were founded by the best of entrepreneurs.  They prospered and faltered, regrouped and persevered through decades in the most uneven of businesses.  When they started out separately, you could hire gregarious, educated children of the rich who knew where to buy a suit and a car, place them at a Navy surplus desk with a rotary phone in a free brokerage office in a building under management and begin to sell or build.

Analysis: That same desk now probably costs several hundred thousand dollars annually to maintain in today’s information age.  Their threshold deal under this overhead structure is a big one.  Team play rather than a culture of individuals is a requirement to please the customer with that size deal requiring services. That same customer is probably run on the real estate side by graduates of one of the better MBA programs at a big B-school.  You know that like kinds attract here.  That same customer may have leverage too as to discounted fees.  Now the two companies have joined to create an institution with even more volume and size requirements.  That seems to me to take them out of the average sized local real estate brokerage or development deal.

Let’s say that the deal under $10 million is too small to meet the criteria.  What do you want to bet that 80% of the numbers for transaction business in this country are under that threshold?  So the typical customers here are the large/larger cap NYSE, ASE & NASDAQ companies and the large financial institutions.  There may be even less capacity to serve the emerging customer than before.  This sounds like the big banks merging and leaving huge, un-serviced holes in the financial markets to be serviced by a new breed of regional banks.  If so, the entrepreneurial broker may find an un-serviced hole here too.  I think this is going to be the case.