As had been rumored for months, two of L.A.’s biggest residential real estate brokerages – The Prudential California Realty and Jon Douglas Co. – have agreed to join forces.

The merged 70-office/4,000-agent entity, to be known as The Prudential Jon Douglas Co., will be among the nation’s largest independent residential brokerage firms in sales volume terms, according to the merger announcement. Last year, the two firms collectively generated sales exceeding $11 billion.

The pending merger is the latest illustration of continued consolidation in the residential brokerage business – which has struggled under the long slump in California home sales.

The merger “reflects the fact that the downturn in the California market has been more severe and lasted longer than anyone had anticipated or planned for,” commented Linda Berg, senior vice president with another major local brokerage, Coldwell Banker Los Angeles Regional Operations.

“It’s another clear indication that with the decline in the number of transactions as well as prices, there is a natural attrition under way in the industry that’s probably long overdue,” Berg continued.

In fact, PCR until recently had been fueling that attrition, expanding aggressively by buying up competitors amid the market downturn. PCR’s acquisitions on L.A.’s Westside alone – where Douglas Co. retains its roots and remains most active – included the 100-agent Kent Realty, the 50-agent Petrick & Associates, 40-agent Norton Realtors and 30-agent Ron Wynn Realty West.

Five-year-old PCR is an independently owned affiliate of Prudential Insurance Co.’s nationwide Prudential Real Estate Affiliates operation. George Rathman and Rick Merrill are the general partners of the partnership that owns PCR’s 50-some Southland offices and about 20 more in Northern California. Another 70-some independently owned offices carry the PCR name through “market facilitator agreements,” but are not parties to the merger.

The Douglas firm, which its namesake brokerage industry veteran founded in 1971, has 30 offices, primarily on the Westside and in the San Fernando Valley.

The principals did not disclose details of the merger’s financial arrangements, or the ownership structure of the merged firm. But they did specify that L.A.-based investment fund Levine Leichtman Capital Partners is providing a capital infusion and taking a minority position in the company.

Jon Douglas will become chairman of the merged Beverly Hills-based firm. Rathman will be CEO. Merrill and current Douglas COO Lou Piatt will serve as presidents.

Reprinted with the permission of the Los Angeles Business Journal. September 15, 1995.