Chinese end-to-end real estate giant KE Holdings has announced a deal to acquire home renovations firm Shengdu Home Renovation Co for a cash and equity consideration of $1.2 billion. The deal is still subject to regulatory approval and will be staggered around performance milestones.
KE Holdings is a leading end-to-end real estate company in China that operates both the Lianjia agency brand as well as the Beike.com property portal. The company was lead by visionary founder Zuo Hui from 2001 until his untimely death earlier this year and has a claim to be one of the largest portal operating firms in the world, generating nearly $11 billion in revenue last year.
Commenting on the acquisition and the opportunity it presents for his company, KE Holdings Chairman and CEO Stanley Yongdong Peng said:
"This is an industry in serious need of high-quality service. As more Chinese families pursue better living conditions, client satisfaction will become the main reason that justifies the continued existence of the entire industry.
This is an industry that calls for high-quality service providers. We see the need for millions of professionals in the home renovation industry, including designers, project managers and workers, to be equipped with industry expertise and professional ethics and win respect through their high-quality service.
This is an industry in need of standardized management and technology. By setting clear standards and targets, reiterating disciplines and procedures, and utilizing organizational structures, technology and internet, we endeavor to transform the industry into an integrated online and offline high-quality service industry."
Although KE Holdings already operates the home renovation brand Beiwoo, a deal for Shengdu, a company with 19 years of experience and revenues of over half a billion dollars, was too much of an opportunity to pass up for the KE Holdings board. According to Reuters, the Chinese renovation market has taken off in recent times having seen an average growth of 8% over the last five years and the synergies and opportunities for standardisation and consolidation in a fragmented market are great.
Property renovations have remained a relatively untapped adjacent revenue stream for property portal companies. Although iBuyers such as Zillow deal in renovations, the work carried out is part of the whole transaction package and not offered as a standalone service. Luxembourg based portal atHome.lu is one of the few to have ventured into the world of renovations as an ancillary service but with the landscape of property portal revenue streams changing, we may see more deals and partnerships like today's in the near future.