After years of trying, Insignia has finally captured number two French broker Groupe Bourdais, giving it a major European presence. Now, under Alan Froggatt’s direction, it must integrate and expand at a time of harsher trading conditions – and when rivals are two jumps ahead. By Jane Roberts
Next week, when the MIPIM roadshow rolls into Cannes, one of the great names in French real estate broking will appear in new corporate colours. Groupe Bourdais, the last of the top three French firms to merge with foreign companies, has finally tied the knot with Insignia.
France’s number three firm of brokers, Jean Thouard, became majority owned by DTZ back in 1998. Last year, it was the turn of France’s biggest, Auguste Thouard, whose 29 offices were bought by Vend”me Rome, which also owns Weatheralls. This time, it’s Groupe Bourdais, which ranks second behind Auguste Thouard in the Paris leasing market.
Chairman Jean-Claude Bourdais, who owned 90% of the firm his father started, may have been the last of the trio to sell, but his negotiation with Insignia was one of the longest-running on-off courtships in the history of property business consolidation (see box on opposite page).
As a result, Insignia Bourdais is way behind rivals like CB, Cushman &Wakefield, Healey & Baker, DTZ and Jones Lang LaSalle, and has a lot of ground to make up to become a genuine force in Europe. Insignia is also entering Europe at a difficult time, with slowdowns in all the main European economies. But the poor outlook in the US must be spurring efforts on the Continent.
“The Bourdais deal puts Insignia on the map,” says the European director of one rival. “They have paid a high price for Bourdais but it was important for them to do it, if you consider that Germany and France are the two key continental markets and Insignia was nowhere in those.”
David Watt, the head of DTZ’s European operation, concurs. “It was a major statement about Insignia’s intention to go into Europe,” he says. “It gives them a platform and we couldn’t see many other options for them.”
Insignia appears determined to make up for lost time. Last week, Alan Froggatt, chief executive of Insignia Richard Ellis and head of Insignia’s European operations, announced he would be passing the day-to-day management of the UK business to Martin Samworth to concentrate all his energies on Europe.
Depth of relationships
Froggatt is keen to emphasise the value of the deal. “The depth of relationships that Groupe Bourdais has with many clients would take us years and years to replicate. They have a very good professional reputation and hold leading positions, for example, in distribution. We’ll be looking to build a cross-border logistics team led by the French.”
Froggatt denies that it was a mistake not to get into Europe earlier. “There was a negotiation two or three years ago that didn’t go ahead. Then, in 2000, came the famous dot.com threat to broking and we were devoting a lot of capital to that to ensure that if it overtook us, we were in a position to act.
“It’s easy to look back and say: ‘Didn’t you burn rather a lot of dollars?’ But the priority for our capital at the time was clear, and if we had our time again, we wouldn’t do anything differently.”
Integrating the Insignia and Bourdais businesses is now a priority. Froggatt says there will be a client-focused approach to building cross-flows between France, the UK and the US. UK board director Hugh Ellington has moved to France, while Bourdais’s Mark Reboux has moved to London to work in the corporate real estate services division. UK investment head Stephen Hubbard and corporate real estate head Matt Pullen in London will concentrate on developing business in their two key areas.
But Froggatt is also looking for immediate expansion. He hopes to “sell” Insignia to potential clients and business-winning recruits on the basis of having added a strong Paris operation to New York and London. “Paris improves the prospect of talented people joining us. Our priorities now are Spain, where we are looking to put a team together in the next six months, and Germany.”
Before Bourdais, Insignia’s European operation was limited to a Dutch business, BDR – bought from the Colliers network in 2000 – a German office in Frankfurt, and small presences in Spain and Italy.
Rivals warn that Insignia may find the going hard. Greg Cooke, chairman of ATIS Real Weatheralls, says: “Insignia, and others looking to expand in Europe, have a problem now because only a few very limited alternatives are left.”
DTZ’s Watt adds: “If I were in their shoes, I’d look at a mix of regional businesses and teams of people. In Germany, they could buy businesses in individual cities or a national specialist firm like Kempers, the shopping centre business that is for sale, and bolt on other skills.”
According to Froggatt, Insignia will look for affiliations to build its operations outside the major capitals and in areas such as eastern Europe and Scandinavia, as a way of building a network for little capital outlay. “Nobody has the cash they had a couple of years ago,” he says.
Announcing its results this week, Insignia said that 2001 was “one of its poorest years ever”. Global earnings fell by 30% to $54.5m (2000: $78m) on worldwide revenues that declined by 5% to $738m (2000: $776m). European revenues and earnings also fell sharply, each by 36%.
The mantra now among all the global firms is to concentrate on the big markets rather than build up comprehensive and expensive wholly owned blanket coverage. Some of the more mature European businesses have been cutting back. Jones Lang LaSalle closed offices in Stuttgart, Cologne and Vienna and made 140 staff redundant on the Continent in December.
CB, which owns CB Hillier Parker in the UK and CB Richard Ellis in Europe and Asia, is selling some of its businesses back to their managements to raise cash (see News). “We are trying to expand in all the major centres,” says CBHP chairman Robert Farnes. “But selling back to management is sensible in areas of the market where there is not huge potential.”
But, while recession fears may be making the big groups nervous about splashing out money on acquisitions, Weatheralls’ Cooke believes that the Bourdais deal shows that full ownership is still the most powerful route to expansion. Both Auguste Thouard and Bourdais were previously in networks of affiliated firms – those of Colliers and Oncor respectively. “The days of the network are truly finished. The question now is who are the main European players going to be?” says Cooke.
With markets slowing down everywhere, it won’t be easy for Insignia to build an effective European operation.
How the deal was done
Takeover story became quite a saga
Insignia’s acquisition of Bourdais was finally agreed last August.
Insignia agreed to pay $45.6m, the majority as an up-front cash sum. But in the period before completion – which included 11 September and the first signs of a market slowdown – the initial payment was cut and the proportion tied to a three-year earn-out period was increased.
Despite this, and with the charm for which the 58-year-old chairman, Jean-Claude Bourdais, is famed, he said: “We are energised by the opportunity to be associated with Insignia.”
Groupe Bourdais has five offices in Paris and three outside, in Lyon, Aix and Marseilles. It is 350 strong, and turns over about £30m, compared with Insignia Richard Ellis’s turnover of £70m, from 760 staff.
Insignia first made overtures to both Auguste Thouard and Bourdais in 1995. The Americans tried again three years ago soon after they bought Richard Ellis in the UK, but were snubbed by Richard Ellis’s continental sister-partnership REI which embraced Insignia’s US rival CB instead.
At the same time, they thought about setting up their own operation from scratch.
Last year discussions with Bourdais were reopened, but Insignia also approached five senior managers at Auguste Thouard with a view to poaching them to set up from cold if the Bourdais talks failed again.
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Who’s big in Europe |
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1 Jones Lang LaSalle European turnover: $348m (year to December 2001) Has the largest turnover, but revenues fell by 2% in 2001, against the previous record year. Has 50 offices, covering all major European cities but has been scaling back as part of a global cost-cutting programme. Slashed 140 jobs in Europe, with Germany and Belgium hardest hit, and cut 90 in the UK. 2 ATIS Real Turnover: £205m When French investment house Vendome Rome bought 74% of Weatherall Green & Smith last year, it said the turnover combined with its other European businesses Auguste Thouard and Muller International was £205m, putting it at number two in Europe. Muller is one of the top firms in Germany and Auguste Thouard had twice Bourdais’s turnover in France. The Weatheralls deal caused Muller and AT to resign from the Colliers network last year, ostensibly because of a conflict with Colliers CRE in the UK. Although ATIS is almost as big as JLL it has no representation in Italy, Belgium, Scandinavia or central Europe. 3 DTZ Turnover: £142m (year to April 2001) European network substantially completed, though it is stronger in north and central Europe and relatively weaker in southern Europe. Wholly owns or majority owns its offices. About to open in Rome. 4 Cushman & Wakefield Healey & Baker European turnover: £95m (2000 figures) European coverage built up by UK partnership in the 1990s. Dominant in retail on the Continent; strong in southern and eastern Europe. 5 CB Richard Ellis European turnover: $113m (year to Dec 2001) CBRE is Hillier Parker’s US parent. Comprehensive European coverage through the acquisition of Richard Ellis International in 1998. Strong Paris office and very strong in southern Europe, especially Italy, Spain and Portugal. But weak in Germany, where European chief Jim Reid has been concentrating resources. US parent went private last year and is carrying high levels of debt. |
