The chief executive of CBRE has said the agency is working on a number of what it called “big merger and acquisition deals” of around $1bn (£777m).
Asked about the outlook for further deals on an analyst call to discuss CBRE’s Q2 results, chief executive Robert Sulentic said: “90 days after we last talked about it, our view of our M&A opportunity is as strong as it was then. We’ve got several things we are working on.”
The things in question include a “steady stream of smaller infill deals” in the pipeline, as the agency, like many of its peers, attempts to navigate the uncertain political and economic climate.
Sulentic added: “They’re not going to all make it. We are confident, though, that some things will and that it will be a very productive use of capital for us over the next few quarters and it will be a very good strategic use of capital.”
This was echoed by chief financial officer Emma Giamartino, who said the agency had a “robust pipeline” and was “evaluating multiple opportunities” to continue growing through mergers and acquisitions.
EG reported in December 2022 that the company spent a total of £11.9m on acquiring consultancies CWM, VSL & Partners and Dougray Smith in the first half of last year alone, according to accounts filed with Companies House. Individual acquisition costs were not disclosed.
“Our focus for M&A and capital allocation over the next 12 to 18 months is consistent with what we talked about last quarter,” said Giamartino.
“We continue to have a very strong pipeline across our M&A portfolio. Engagement has steadily increased across a number of deals as the year has progressed. And as we said before, we are looking across our portfolio of businesses. We are looking for opportunities to enhance our core offerings going forward.”
Market recovery
While CBRE is ambitious in its M&A outlook, both Giamartino and Sulentic agreed that current market conditions may prove a pinch point for the company in getting deals of this magnitude across the line.
“Big deals kind of take on a life of their own,” said Sulentic. “You have to get through agreeing with the other party on a deal, working through an integration plan, working through an agreement that then becomes a definitive agreement, and those things ebb and flow.”
“The reality is that deals take time and we are working on a number of them,” added Giamartino. “And it takes even more time to do a very well-executed deal, where we can underwrite to a level that we think are required to deliver a really strong return.”
Acquisition criteria
While he did not want to be too specific, about where the company sees M&A opportunities, Sulentic said there were two key criteria for any potential opportunity.
First, they must advance CBRE’s ability to serve its clients in areas where the business is currently lacking. Second, they need to be well-run companies that CBRE, “in some cases, will bring leaders in to run parts of our business with those acquisitions”.
“When we announce some of these things, they will sound kind of consistent with what people might have expected and some of what we are doing will sound different than what people might have expected,” said Sulentic.
He added: “You should expect to see M&A from us that will expand our capability to serve our company with well-run companies, with good brands. And if we can’t get those kinds of deals done, we’re not going to do M&A. We’re not going to force it just to build scale. We can build scale through organic growth.”
CBRE’s M&A focus comes as the company reported second quarter results that “slightly exceeded” expectations. The firm reported revenue of $7.7bn (£5.9bn) in the three months ended 30 June, down by 0.7% on Q2 2022. Capital markets revenue dropped by 44%.
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