It was Savills’ biggest acquisition, and in less than a year splashing $260m (£154m) on US-based Studley appears to be paying off for the UK-listed agent.
The addition of the business to the Savills empire has boosted revenues in the US from £6.8m in 2013 to £112.3m last year and turned a £1.6m loss into a £12.4m profit.
And that, says chief executive Jeremy Helsby, is just the beginning. He wants to more than double the size of the US business within five years and have it represent around a quarter of group revenues.
That job falls largely to Savills Studley president Michael Colacino (pictured left, with Helsby), who jokes that the last time he had to double the size of the business he had 12 years to do it. “Now, I have five,” he says.
But with three acquisitions under his belt in the first four months of 2015, including two this week, Colacino is well on the way to achieving the firm’s ambitions.
Following on from the acquisition of KLG, a New York-based management consultant, last month, Savills Studley has this week bought Tampa-based Vertical Integration to bolster and better establish its occupier services business. The 12-strong business brings with it strategic leadership in the form of founder Ann Duncan, who will become head of Savills Studley’s occupier services group.
But the game-changing deal, says Colacino, is its circa $20m (£13.4m) acquisition of Cooper Brady Partners in Silicon Valley. The purchase adds 21 brokers and 10 project managers to Savills Studley and makes it the leader in one of the hottest markets in the US.
“This is a transformative acquisition for us because we have not been strong in Silicon Valley,” says Colacino. “It is one of the major engines of worldwide economic growth. By flying our flag with them we immediately get credibility in one of the biggest markets in the US and in the world.”
“This is a significant sum of money into a very significant market,” adds Helsby. “We are placing a bet saying we believe in Silicon Valley. Some 25% of all take-up in London is coming out of America, a large slug of that from the Valley. We have got to be there.”
As the market leader in tenant representation, Colacino is acutely aware of the importance of the employment market to his business. And nowhere is employment growth stronger than in Silicon Valley. The area has an 8% annual growth rate in employment and a whopping 20% in the tech sector.
“That’s an astronomical number,” says Colacino. “Even in New York, where we’ve had a rebound from the financial crisis, you are looking at a 3% compounded annual growth rate in employment. It is almost triple the size of growth in other US markets.”
Helsby labels the deal a slam dunk and an incubator of new business, not just in the US, but globally. And that was exactly the point of the Studley acquisition.
“By not being able to access US occupiers, you’ve lost 25% of the market – that’s massive,” says Helsby. “We are now a global company. Before we had 1% of our revenue coming out of America. Last year it was roughly 10%. This year I would predict it is going to be somewhere between 15% and 17%. I would like to get that number to 25%. If you are going to be a global company, the US ought to be a significant part of your revenues.”
So far, so good. Since getting all the people in place following last May’s acquisition of Studley, both Helsby and Colacino believe the Savills Studley business has been fully integrated into the wider Savills system for six months now and in that time has generated 450 opportunities.
“That is a remarkable figure when you think that we have only around 350 brokers,” says Colacino proudly. “Our guys are hunter-gatherer types and the opportunity to have a much larger area in which to forage is very attractive. People are now thinking all round the world and we have pushed people to Asia, to Europe and the UK. We’ve done transactions all over the world and it has been phenomenal for us.”
The integration of the business has enabled Savills to represent companies including Opentable, Buzzfeed, Black and Veatch, Sterigenics and Panasonic in Europe.
And while Savills Studley’s strength lies in tenant rep work, the knowledge of the US marketplace has started to allow Savills’ capital markets teams from around the world to complete major investment transactions with acquisitive US firms in the UK and bring its global clients to the US, which many, particularly Asian, investors have generally viewed with trepidation.
Of the £3.2bn of investment from US investors into London in 2014, Savills was involved in around 18% of the deals. Of the circa £500m already invested this year, Savills has advised on around a third.
And, last summer it advised on the sale of a $1.2bn Los Angeles development project at 9900 Wilshire Boulevard by a Hong Kong investor to Dalian Wanda. A deal, says Helsby, that would have been impossible without Savills Studley and something he is keen to do more of.
Since the acquisition, there have been a number of relocations to feed, nurture and grow relationships.
Studley’s former managing director of international services Matthew Purser is the point person for the business in London, Iain Chapman is the go-to man in Asia, while Savills star Borja Sierra, a man who has advised on more than $8.4bn of deals, is head of US capital markets for Savills Studley in New York, with director of cross-border investment Rasheed Hassan also spending more time across the Atlantic to link the capital markets teams.
“In my 35 years at Savills, I genuinely believe that this is the most exciting opportunity for the group that we’ve got,” says Helsby. “We have no strategy to be the biggest. We want to grow, but it is not our strategy. Our strategy is to be the best.”
Colacino adds: “We had been dying to have an international capability. The US is a big market, but the world is bigger still.”
“Ten years ago we might have said we were a global business, but we weren’t,” admits Helsby frankly. “Now I can stand here and put my hand on my heart and say, ‘Mr Client, Mrs Client. We are a global player’. We can compete now. And in many cases, beat.”
