What I’ve Learned From Our 15 Acquisitions
In November 2018, Zillow Group closed its 15th acquisition, consistent with our strategy to create better consumer experiences at every stage of the home life cycle. We acquired Mortgage Lenders of America, a national mortgage lender based in Overland Park, Kansas, so we could streamline, shorten and simplify the home-buying process for consumers who purchase homes through Zillow Offers. Plus, we think it’s a massive opportunity to use our analytics, tech and consumer knowledge to build new mortgage tools for partners and consumers. I’m incredibly excited about the acquisition and offering buyers of Zillow-owned homes a faster, more streamlined experience.
Mergers and acquisitions (M&A) can be a terrific accelerant, allowing a business to accomplish something it could do on its own, but that may have taken years. While M&A can be a huge boost to your ambitions, getting it right is complex.
No matter how well executed, M&A is challenging — from the lawyers and regulatory reviews to integrating cultures and working toward a shared mission. Nearly all of our 15 acquisitions have propelled our business forward, and I’ve learned a ton along the way that guides our approach to M&A today.
Identify company ‘crushes’
First, I’ve learned how important it is to identify company “crushes.” There are a lot of reasons to consider M&A — expanding your audience, entering new markets or developing new lines of business — but it starts with keeping your pulse on companies that align with your business goals, both today and long term.
M&A is interesting to me because it’s where I started my career (in the M&A group at Goldman Sachs). At any point in time, I’m keeping an eye on a half-dozen companies I covet and hope to acquire someday. The opportunity might present itself down the road, and the best way to increase the likelihood of a deal is to think three moves ahead. But I need other parties to track their own “crushes,” too, to identify the best opportunities — and not let any slip through the cracks.
M&A ideas come from many places inside the company (e.g., business unit leaders, the board of directors, rank-and-file employees) and outside of the company (e.g., customers, the news media, investors and shareholders, investment bankers, accountants, consultants and lawyers). Stay on top of innovation that’s in your lane and outside of it; you may not know today how your business will evolve tomorrow.
Successful M&A always starts with a proper evaluation of the people and culture of the target. Integrating company cultures is tricky to get right, and it’s much smoother when values are aligned. When there are shared values, employees can jump aboard immediately and work toward a common mission.
For example, when we were interested in merging Zillow with Trulia to create Zillow Group, I met with Pete Flint, Trulia’s co-founder, for a Glassdoor “showdown.” We sat down for nearly two hours reviewing employee comments about each other’s companies and our approaches to culture and core values. It became clear from employee feedback and Pete’s willingness to have a transparent discussion that Trulia and Zillow were a values fit.
Look for mission-driven founders
Along those lines, I’ve learned it’s critical that the founders are motivated by mission, not financials. Does the management team, and the whole company, care deeply about their own product and how consumers interact with it?
When we were in talks with HotPads, for example, I asked co-founders Douglas Pope and Matt Corgan about the future of shopping for a rental apartment. They knew there was an opportunity to make it easier and more seamless for consumers to find their dream apartment, and they were passionate about joining Zillow Group because they knew the acquisition would accelerate HotPads’ mission. Both Douglas and Matt continue to drive innovation at Zillow Group a decade later.
I saw something similar when we met with Mortgage Lenders of America. The executive team and the employees have a consumer-first orientation; they care deeply about providing best-in-class services and innovative solutions for home buyers. Getting a mortgage can be one of the most cumbersome parts of buying a home, and they’re passionate about making it better. Their mission-driven approach aligns well with Zillow Group’s.
Focus on the long term
Lastly, I learned the value of persistence — nearly all of our deals have taken years to come to fruition. When we were considering acquiring StreetEasy (one of my longtime company crushes), I had a reminder on my calendar set for every few months, reminding me to ping co-founder Michael Smith to see if he was interested in selling. I was relentless about it.
One evening my wife and I were at out at a movie, and I got up to get popcorn, when the alert buzzed on my phone. I stepped out of line and called Michael. Finally, the timing was right for the acquisition, and he agreed to discuss the terms. I called Kathleen Philips, who was general counsel at the time, and the rest is history. It was one of our largest acquisitions to date, and one of our most successful, and it happened because of persistence.
Our most successful acquisitions have stemmed from shared values, mission-driven founders and persistence. But they started with keeping our pulse on the industry and focusing on the needs of the consumer. M&A strategies are most successful when they have a focal point. In our case, it’s improving the home-buying experience for our north star: the consumer.