On Zonda’s recent acquisition of BDX, a popular consumer-facing website for new construction home listings…

“BDX was a company that was originally founded and owned by the top 26 home builders in the United States.

Over the course of over 20 years, BDX became the leading new home construction listing platform, primarily because they had more robust content than anybody. The relationship with these top builders is pretty unique and exclusive, getting direct feeds daily with real-time price updates, new communities, and they're all committed to the BDX platform.”

 

Meyers’ product vision…

“You expect to be able to get on your device and find everything you want. And in the new home context, it's not a perfect journey. So our goal is to change the whole customer journey: visualizing a site map, putting a particular new home on a particular lot, designing that home, and then through our other app, U-Tour, you can basically book a self-guided tour on your time.

[Consumers] don't want to interface with the salesperson the first time they go to a community, they'd rather have a private, self-guided tour, get comfortable, and then they'll engage when they're ready.

These modules have been built and acquired through us over time, but we haven't stitched them together. So that's the work that's left to be done to make it a seamless journey for the consumer.”

 

Staying disciplined, even when executing Zonda’s strategic vision…

“Don't underestimate the two companies’ significant synergies. We came at this with a private equity-backed thesis, so everything’s based on a multiple of EBITDA – and this acquisition is absolutely accretive.”

 

The realities of getting a deal done…

“Buying a company from 26 builders is a hard acquisition. It's not like you go to a private equity firm, get approval, and away you go.

There are 4 BDX board members. We convinced them first and went, ‘Oh, we still have more than 20 builders that need to sign this deal,’ so you can imagine the [process]. Then we had to go through the FTC, so it was a more than seven-month journey for us to get this to close.

The other challenge is we've just been meeting with the BDX team for the first time in detail because of the FTC; there's a lot of things that they couldn’t disclose [during the sale process], so we couldn't really get under the hood.”

 

How important is your data strategy?

“I told the team, ‘If the data is good, we just struck gold.’ It's so exciting because of the analytics we're now getting on the platform.

All these consumer insights about where people want to move and what house plans they prefer.

Twenty-five percent of all new housing is run through our platform, so we get this incredible consumer preferential data: which brand of appliance? Which cabinet? Which countertop?

You can imagine the type of analytics we can run for both the home builder and the manufacturer.”

 

How has Zonda managed add-on processes?

“[On our side,] it's pretty much myself and Andy Reid (Zonda’s COO). We've made seven acquisitions since the original merger, and 100 percent have been self-sourced.

As an entrepreneur, that's the part I love. I love identifying exciting companies and entrepreneurs.

[Previous Zonda add-on] U-Tour is a good example. It was a three-year-old startup that had reached positive EBITDA, and we’d been tracking it. The founder decided that, rather than raise another VC round, I'll exit. And it worked out really well.

So, I'm always trying [to find the next opportunity]. With the market today, it's not exactly a great time to be doing VC, especially PropTech. And so a lot of these companies are looking for capital, and we can be another solution.”

 

How have you thought about capital structure and add-on financing in the current environment?

This deal actually de-levered us. It brings a pretty big increase in revenue, and that’s worked to our advantage.

 

What’s been your experience working with MidOcean?

It's been great. I mean, private equity is money. It's all just capital, right? So that's kind of a level playing field. But what you really want to know is, what's your partner like in good and bad times?

We closed in December of 2018. Everything went great. And then COVID hits. There was a period when COVID hit that, let's face it, everyone's like, oh no, what's gonna happen? You really want to understand how your partner responds, and they were awesome.

MidOcean held weekly calls with all of their portfolio CEOs, because this is an unheard of event. We worked daily together—it was a collaborative effort, not them saying do this, do that.

I thought that was a good test. I've been with private equity in past experiences where when things got troubled it wasn't as much fun. It's never fun, but MidOcean was very proactive and very thoughtful around decisions.

 

On MidOcean’s operating partner focus…

“I also really like MidOcean’s operating partner model.

One of MidOcean’s resources is an operating partner who oversees all brand marketing – he was CMO at Burton Snowboards and Patagonia, so his brand expertise is amazing. He helped us go through the whole brand platform process and we ended up with Zonda as the ultimate name for the corporate company.

We're also really fortunate to have John Kahan, who was the chief data officer at Microsoft. He's going to help us design the data lake to make sure we've got all the pieces of the puzzle [from the BDX acquisition].

We also have one of the co-founders of QVC who’s helping us on audience; he's incredibly smart around performance marketing.

So [MidOcean] really provides not just money, but also the operating support — they've been great.”

 

Looking toward exit:

“I mean, hey, we're six years into this investment. However, this is a big acquisition in year six, right? So, as I think about our exit strategy, there could be either private equity or a strategic partner.

The types of businesses [that could be a good fit] would be data businesses, maybe listing businesses. The key is that we're razor-focused on new construction, which is really hard for the others to pivot to.”