Casago, known for its superior vacation rental management services, and Vacasa, a dominant force in North American vacation rental platforms, have formalized a merger agreement. Under this agreement, Casago will purchase all publicly held shares of Vacasa at $5.02 per share, with possible adjustments outlined in the merger contract.
The merger aims to address scaling challenges Vacasa has faced. Despite traditionally successful rollup strategies in other industries, Vacasa struggled with inefficiency and high costs from acquiring local property managers. The question remains whether merging with Casago, which employs a franchising model, will provide the necessary scale and efficiency.
Will this merger allow the scale Vacasa’s vacation rental property management to stop churn?
Vacasa is reported to be the leading U.S. property management firm with 36,500 homes in December. They have faced significant hurdles in scaling up over its 15-year history. The company’s strategy of acquiring numerous local property managers proved both inefficient and expensive, leading to a high turnover as many homeowners opted out for competitors following these buyouts.
It’s been reported that Vacasa typically lost about 30% of its management contracts post-acquisition. In response, a few years back, Vacasa pivoted to using its sales team to secure new properties for management, yet this did little to curb the ongoing issue of homeowner attrition.
Sell Off Local Operations and Enter Into Franchise Agreements
Casago‘s strategy includes divesting some local operations post-merger and establishing franchise agreements with the new owners. This approach aligns with Casago’s existing model, potentially generating revenue through asset sales and ongoing franchise fees. This strategy is meant to leverage local expertise while mitigating the risks of large-scale management.
Transaction Details
The merger values Vacasa at $128 million, offering $5.02 per share to shareholders, although this could be adjusted based on homeowner retention rates and Vacasa’s liquidity. Specifically, the deal price could decrease by $0.10 per share for every 500 units below 32,000 managed by Vacasa shortly before closing, with similar adjustments if liquidity dips below $15 million. This is a significant drop from Vacasa’s $4.5 billion valuation before going public in 2021.
How Will This Impact Panama City Beach
The merger between Casago and Vacasa could influence Panama City Beach, where Vacasa has a strong presence in short-term rentals. With 2024 seeing fewer rentals and higher expenses, the local condo market has been affected. The prices of Panama City Beach condos for sale has dropped significantly in 2024. If the merger yields operational efficiencies, this could help owners of short term rentals.