It took a new chief executive barely a year to confirm what many in the market had seen as inevitable for much longer than that: Cushman & Wakefield is for sale.
Edward Forst has appointed Goldman Sachs, his alma mata, and Morgan Stanley to advise on options. Having reviewed business prospects since his appointment as president and chief executive of the agent in December 2013, it quickly became clear to Forst that Cushmans’ future success would be best delivered by a new owner.
Real estate’s stunning recovery in the markets in which the firm is strongest – London and New York – has created a window of opportunity on which Exor SpA, which owns a majority stake in Cushmans, is seeking to capitalise.
And it begs a big question: could it mark the first £1bn sale of a property agent?
It’s not impossible.
The Agnellis paid $565.4m for a 67.5% stake in C&W in 2006, before increasing their holding to 81%. Pretax profits for the 12 months to September 2014 were £105.2m. A 10-times-earnings multiple has been applied to takeovers in the past. For a business of Cushmans’ size that’s unlikely. Yet even a reduced multiple could drive the price towards the £1bn barrier, given that earnings will have grown since last September and will be expected to do so again in the next few years.
So who are the likely buyers? A sale to a competitor will be resisted. Talks have taken place with rivals over the past two years and Cushmans, rightly, has concluded that a significant part of its value lies in the preservation of its brand. Private equity is likely to lead the suitor pack. A swoop by TPG and the creation of Cushmans-DTZ has to be a possibility. Meanwhile, it’s likely other built environment/infrastructure businesses, and perhaps professional services firms, will cast an eye.
An IPO or, for that matter, the status quo shouldn’t be discounted either. But the latter is unlikely. Cushmans’ future has been so openly discussed for so long that bankers have not been appointed so much to advise as to sell. As in any cycle, there is a window when value can be maximised and Cushmans won’t want to risk seeing it close.
The Sage of Shoreditch has spoken. John Burns of Derwent London, perhaps the most admired developer around, called the market this week. And he assuredly said it was some way off its peak: “Overall we see scant evidence so far of a commercial property slowdown in London and we expect to see rental growth at least maintained at 6-8% across the portfolio, and investment yields to remain firm in 2015.” With London delivering a 22% total property return in 2014, Lambert Smith Hampton doubling profits and SEGRO posting excellent results after completing its £3bn, three-year restructuring programme, the early caution that greeted 2015 appears to be dissipating. You can see why Cushmans is making its move.
I’ll maintain it was judgment, not fortunate timing, that saw the Estates Gazette team stage our latest Question Time event in Aberdeen this week. With the oil price plunging, job cuts a reality and economic challenges legion, a debate on regional prospects could hardly have been more timely. There will be full coverage next week, but I will reveal early one clear and familiar pattern to much of the questioning.
To paraphrase one line taken: Is the slowdown a temporary phenomenon, or is there a fundamental rebalancing going on? What role should the public sector play in stimulating economic activity? And should the sector seize the initiative by cutting out the excesses for which it has become renowned?
Yes, the oil industry in 2015 sounds an awful lot like the property business in 2007.
