Pen was put to paper on at least one agency M&A deal this week.
TUPE-related I’s are being dotted and T’s crossed by BNP Paribas Real Estate as it nears completion of its alliance with Strutt & Parker.
Meanwhile, individuals are rewriting their own story: none more significantly this week than James Beckham. Cushman & Wakefield’s head of central London investment is leaving to join CBRE.
In some ways these are not significant plot changes: the scramble for scale among advisers is a long-running saga. However, you don’t have to read too much between the lines to see a very different conclusion to a seemingly familiar tale.
This week’s deal? On the Continent, involving a top-five firm, details yet to emerge. BNP PRE and Strutts? Completion by the end of next week remains the goal.
And Beckham? Well, when one of the City’s best-known investment agents switches sides – he acted on the sell side of the Cheesegrater deal and on the buy side of the Walkie Talkie transaction – the market takes notice.
We may not, however, have our heads turned by these sorts of deals for long. The narrative is changing.
We have got used to horizontal integration: agents acquiring other agents or even firms in other branches of professional services buying market share in real estate.
Back in 2010 when Deloitte bought Drivers Jonas I wrote on these pages how it could be just the beginning. Inter-agent tie-ups have continued, but when it came to the likes of PwC, KPMG and EY moving into this market, I was wrong.
Today, the future looks very different; scale and satisfaction have different benchmarks. As a result, expect less horizontal integration and potentially dramatic vertical integration.
It wasn’t always thus but these days scale is more about adding margin than revenue. Customers are changing too, placing less emphasis on established relationships than on accuracy, speed and value – backed up by evidence.
And whether public, private or partnership, the largest advisers have sought to expose themselves less to erratic income flows and more to the predictable: investors demand it.
All this has influenced recent M&A activity, but will determine their decisions in the years ahead.
It has been most apparent in the facilities management space. With its acquisition of Johnson Controls’ Global Workplace Solutions arm, CBRE has led the way in ramping up here. But it’s there in development too. Bank-owned BNP PRE is already active, developing offices at King’s Cross and the Hexagon Apartments in Covent Garden.
This will go much further.
In seeking to offer an end-to-end service, could an agent buy a construction business? Offering clients delivery as well as management might be part of their future.
In FM there may be another plot twist. In this time of volatility, firms will look to grow their offering in a sector that provides a bastion of stability. But don’t lose sight of the fact that the biggest FM businesses dwarf even the largest advisory firms. Sodexo, for example, is a €15.4bn (£13.6bn) operation. Even CBRE is only worth $12.6bn – £9.3bn). The likes of Sodexo, ISS and Compass Group could easily pick off a real estate adviser or three.
I say easily. There would be significant cultural challenges to overcome – ask UGL, which bought and sold DTZ, or Atkins, whose ownership of Lambert Smith Hampton was not a happy tale.
But these are surmountable obstacles. Expect the future to look very different to the past.
To send feedback, e-mail damian.wild@egi.co.uk or tweet @DamianWild or @estatesgazette
