Recent developments in the relocation industry have seen SIRVA, a prominent relocation services provider, facing severe debt issues. This financial distress has drawn significant interest from private equity and credit firms looking to take over the company (as reported by FEDEMAC).
CLARITY NOTE: All Points Relocation does not view itself as a direct competitor to SIRVA, given our focus on low-volume, high-touch services. Still, we feel it is important to address these developments and their implications for the Canadian relocation landscape. We also feel that it is always wise to see if developments in the industry are isolated or emblematic of greater change.
The Private Equity Interest in SIRVA
It has been reported that several private equity and credit firms are now involved in SIRVA, despite its financial struggles, attracted by the potential for restructuring and value creation. A recapitalization was recently completed with new ownership that includes KKR Credit Advisors, Evolution Credit Partners, BlackRock Financial Management, and Indaba Capital Management. Typically, these firms acquire distressed assets at lower valuations, implement operational improvements, and eventually sell the company at a profit. For SIRVA, this could mean a comprehensive overhaul of its debt structure and business operations to restore profitability and growth.
Impact on Real Estate Referral Revenue
The real estate industry, particularly in the United States, is undergoing significant changes that threaten the traditionally lucrative real estate referral fees earned by relocation management companies. In conversation with one medium-sized company, I was told that all of its global mobility revenue accounted for only a third of its real estate referral revenue. Obviously, a threat to this source of revenue is concerning to many relocation companies. Does SIRVA’s new ownership group know this? This time next year, real estate referral revenues could be significantly lower across the United States. It is reported that relocation volumes are down across Canada and the United States, with some belief that 2025 will see a modest increase.
Concerns for Canadian Accounts and Lower Volume Clients
The purchase of a distressed company by private equity might play out differently in the more mobile United States, where large multi-hundred move accounts might see only moderately reduced service as private equity insists on headcount reduction. However, the impact will be more severe for lower volume accounts, especially those in Canada. The lower Canadian dollar will be repatriated back into the U.S. private equity company’s coffers – each dollar being discounted by approximately 27%. Between the lower volumes, need for greater assistance/direction, and the lower dollar, many Canadian accounts might feel that they are not getting the attention they need.
You don’t have to believe me on this matter, but this is the reality of how such financial transactions typically unfold. Lower volume Canadian accounts are likely to experience a decline in service quality as the focus shifts to maximizing returns for the private equity investors.
This isn’t just about SIRVA
SIRVA’s story might make headlines, but the relocation industry itself is not as super healthy as it was in 2022 when everyone was relocating. It has dealt with fewer and fewer real estate referral fees for years, as companies remove home sale programs, and, as a result, opportunities for these fees are removed. Canada is a small sandbox, and most Canadian corporations have seen their volumes shrink along with their policy benefits. With smaller policy benefits, there are generally lower revenue opportunities for relocation companies. We predict that more and more companies will question whether they want to be in relocation anymore, without private equity investors, or specifically choose to pay less attention to Canada with its relatively low volume of relocations.
The Prohibition on the Purchase of Property by Non-Residents Act does not help either. Many companies were running BVO programs (home sale) programs, but American relocation companies can no longer buy properties (a necessary part of this program). So, many companies with American relocation management companies have stopped their home sale programs, making Canada even less attractive.
The Human Element of Relocation
Relocation is fundamentally a human service. It requires empathy, understanding, and a commitment to helping individuals and families transition smoothly to new environments. Private equity, driven primarily by financial returns, may not prioritize these essential aspects. The human element of relocation cannot be overlooked, as it is crucial to maintaining the quality and integrity of the services provided. Canadian companies should look to the motivations of their relocation provider and make sure that their vision is aligned for their relocation program.
Conclusion
The recapitalization of SIRVA, amidst significant upheaval in the real estate industry, underscores the financial challenges facing the relocation sector. While private equity and credit firms can provide the necessary capital and strategic direction for distressed companies, it also raises concerns about the future of human-centric services in the industry. At All Points Relocation, we remain committed to providing personalized, high-quality relocation services that prioritize the well-being of our clients and their families.
Relocation is not just about moving assets; it is about moving lives, and that requires a level of care and dedication that goes beyond mere financial returns. It is a hard business with thin margins, and the focus must always remain on the people we serve. Private equity may not be interested in sub-10% returns (without those many, many lucrative real estate referral fees), but those are often the realistic margins in our industry without compromising service quality. In the end, it’s not private equity that’s interested in helping other humans; it’s other humans.
We will continue to monitor these developments closely and ensure that our clients receive the support and stability they need during their relocation journeys.
About All Points Relocation
All Points Relocation is a Canadian-owned, independent relocation company specializing in high-touch services. Our dedicated team works tirelessly to ensure every relocation is handled with the utmost care and professionalism, providing customized solutions that meet the unique needs of each client.
For more information or to discuss your relocation needs, please contact us at clientservices@allpointsrelocation.com
