Property: The local man restored - Small estate agents, bought out in the boom times, are thriving again. Anne Spackman hears the story of one Cumbrian firm

Michael Walton and David King are next-door neighbours in Carlisle. Mr Walton is arguably the most successful commercial estate agent in the city; Mr King runs Carlisle's salerooms and, with his daughter Julie, one of the top residential estate agents. They have a lot of experience and contacts between them.

Across the street is a branch of the Nationwide building society. If Mr Walton and Mr King are the grey heads of the property business, the Nationwide is its white socks. Once, the grey heads and white socks worked together, after the takeover by Nationwide in 1987 of Tiffen King Nicholson (TKN), the established Cumbrian practice where the two estate agents then worked. It was a classic corporate buy-out.

The aftermath has also been typical. Most of the old partners have dropped the corporate logo and gone into business by themselves, funded by their Nationwide cheques. They are doing very nicely, thank you. Meantime the Nationwide is struggling. Estate agency is one of the few businesses in which the old guard has had the last laugh.

This is the story of why the corporate venture has not succeeded. It is one that has been repeated up and down the country in hundreds of towns and cities. The official wisdom is that the financial institutions which bought into estate agency in the boom thought they were buying a licence to print money: they threw out the expensive partners, replaced them with cheap juniors, and came unstuck when the housing market collapsed.

That is all true, but it is not the whole story. Mr Walton explains: 'TKN had 12 offices across the county. At least 60-70 per cent of our business was done on the basis of knowing everyone. We were a typical provincial firm.

'In 1986 we were approached by three financial institutions to sell the partnership. We decided to go with the Nationwide. All the existing partners were given contracts to remain with the firm. The basis of the agreement was that they wanted us to stay as we were, retaining our name and running the business as it had always been run. The advantage was that it would be a one-stop shop for housebuying and financial services.'

Millions of pounds were duly exchanged and in January 1987 TKN was sold to the Nationwide. So what went wrong?

At first things ran quite smoothly. Mr Walton says the men who negotiated on behalf of the Nationwide fully understood that the business thrived because of the personal contacts and expertise of its partners. But after a while, a very different set of people was put in to manage the business.

'They wanted to integrate the management into their corporate system,' Mr Walton explains. 'That simply did not fit in with having eight senior directors, all with their own specialisms.'

Decisions that had been taken in 30 minutes now took three months. The TKN name was replaced by Nationwide. Mr Walton remembers a team of management auditors coming to assess the business for the Nationwide. Like all the staff, he was asked what he had been doing the previous morning. 'I said I was sitting as an arbitrator in a rent review in Penrith. The reply was, 'What has that got to do with estate agency?' That incident encapsulated the problem.'

The new men did not seem to realise that 40 per cent of TKN's income had come from professional work such as that. Selling houses paid the salaries and bills; the profit came from the broader business of valuing, surveying and managing property. 'The professional work was of no interest to the financial institutions,' Mr Walton says. 'They thought they could get rid of expensive qualified chartered surveyors and replace them with young salesmen and women who would cost much less and get the same result.'

He says they were not altogether wrong: a young salesperson can cope with the day-to-day work of flogging houses, as long as the sale goes smoothly. It is when things go wrong or get complicated that more knowledge is necessary.

Another problem was the introduction of targets for levels of instructions. Suddenly, agents were agreeing to take on houses at prices they knew would not sell, so as to fulfil their quota. In the long term this makes no sense as the houses fail to sell and the agency wastes money advertising them.

Then there was the problem of having the estate agent as a house seller and as a provider of mortgages to house buyers. This, above all, made many of the old partners feel uncomfortable.

By 1990 almost all of them had gone. Mr Walton established his own business. Mr King bought the salerooms that TKN had sold to Nationwide and, when his daughter set up Julie King estate agents, he became a partner. John Tiffen now runs a residential and commercial agency. Philip Bulman is also running his own independent estate agents in Carlisle. Two partners retired and one went to work in a practice in Oban. Just one partner remains with the Nationwide and is now its regional manager in the South-west.

'The parting was not particularly acrimonious,' Mr Walton says. 'We just all agreed we weren't going to live together.'

The same thing happened with the other major buy-out in Carlisle. The partners at Gibbings & Johnson, which was bought by GA, are now in business on their own. Two of them give Mr Walton his main opposition and a third works with Mr Tiffen.

But can all these independents survive in what is still a very difficult market? Mr Walton doubts it. He believes the property slump was three times worse than it should have been, because of the corporate buy-outs. The firms were not broadly enough based to compensate for the fall in house sales. If the fledgling independents are to avoid the same fate, he predicts, they will have to regroup as the mixed practices they once were. 'The wheel will have come full circle,' he says.

(Photograph omitted)