Earlier this week Greg Ellis, the CEO of the REA Group, announced that he was stepping down from his position to take up a role overseas. There was no mention of the destination and the REA Group is in limbo with the Board appearing to be caught flat-footed and now having to fill both the CEO and CFO roles.
In the wake of this announcement, there is speculation that Greg Ellis is going to take up a role at ImmobilienScout24 (Immoscout24 or IS24) in Germany. While this initially may sound a little crazy, further analysis indicates that this could be possible.
Immoscout24 is the market leader in Germany. It is dominant like the REA Group and faces similar levels of competition. In late November this year, Hellman & Friedman acquired 70% of the Scout Group (and thus ImmoScout24) for an enterprise value of 2.0 billion euros. This is clearly a high price and therefore Hellman & Friedman will need to get as much value as they can from the investment as quickly as possible. Given the level of dominance in the German market and the high level of penetration of German agents, Immoscout24 must focus on growing the ARPA - the average revenue per agent / advertiser - to deliver the implied value in the acquisition price.
One area that the REA Group has executed well since 2005 (and is probably a global leader at doing) is extracting value form agents through the sale of premium products. Therefore given the level of investment made by Hellman & Friedman, it would not be surprising to see them "poach" Greg Ellis to run Immoscout24. He would bring his experience in building a strong ARPA in Australia to the German market and help Immoscout24 capture more value from its advertiser base.
Given the deal is expected to close in the first quarter of 2014, the timing would work well with the search by the REA Group Board for a new CEO.