DTZ chief executive John Forrester was this week hoping to see a bounce in client goodwill towards the firm after it began a financially secure future as part of Australian-listed global services giant UGL.
“Clients who wanted to push contracts our way were unable to before now. Things were held in abeyance,” he said.
In the end, it was a short court hearing attended by a handful of lawyers last Sunday afternoon that saved 227-year-old DTZ and preserved the jobs of its 4,700 staff. By then, DTZ’s roller-coaster ride had effectively rendered it insolvent.
The only bidder for the business had valued it at less than its debt, meaning its directors would be unable to fully repay more than £100m of loans.
With the firm mired in uncertainty, Forrester faced mounting pressure from rivals attempting to poach both staff and clients. Fears were growing that the value left in the business would only be further eroded.
These factors drove home the realisation that a sale to UGL using a pre-pack administration was the best – if not only – option to preserve the business as a going concern and get as much value as possible for its creditors.
Sale price
The price agreed was just £77.5m, less than a fifth of DTZ’s value five years ago.
UGL’s success in picking up DTZ at such a rock-bottom price clearly makes it the biggest winner here. DTZ’s shareholders, meanwhile, were left to write off their investments.
The board’s application to appoint Ernst & Young as administrator last weekend circumvented the need for a shareholder vote on the sale.
What has perplexed the market, however, is the idea that majority shareholder Saint Georges Participations’ three board representatives might have supported a step that would deliver nothing to shareholders.
But the message from several quarters is that the three French non-executives did just that in order to fulfil their responsibilities, not least to DTZ’s staff. “The speed and certainty this process gave us was very important for DTZ staff and for UGL,” said Forrester.
SGP, which had spent more than £80m building its 55% stake, had itself unwittingly triggered the latest troubled chapter in DTZ’s history through its aborted attempt to buy the remainder of the business and sell it on to BNP Paribas Real Estate earlier this year.
SGP, controlled by the French Mathy family, has lost a further £15m in unsecured debt. This loan does mean that it will claim the lion’s share of the money available to unsecured creditors – but this sum is capped under insolvency law at just £600,000.
It had also provided a £5m loan facility to DTZ. This was ranked super senior in the firm’s debt pile, so the drawn amount will be repaid.
The rest of DTZ’s senior debt was provided by RBS, which had been assessing its own options for several months with E&Y. It is owed close to £100m, so will have to take a significant write-down when it is repaid from the £77.5m sale proceeds.
Shareholders ‘stuffed’
DTZ’s other shareholders will also be counting themselves among the losers in this story and there are more than 170 of them in the business. As one put it, “the shareholders have been stuffed”. But the same senior shareholding director acknowledged that the sale was “a good deal for staff.”
How it will pan out will be chiefly down to Forrester and Bob Shibuya, the group president of the UGL Services division in which DTZ now sits.
“UGL has a very strong full-service offering in corporate real estate in the US – probably the only market where DTZ didn’t have market-leading coverage. There is huge global synergy,” said Shibuya. “We now start the really serious process of building a single platform. That will take in the issue of what is the best brand for all our services across the world.”
Away from the glare of a UK listing, Forrester is eager to focus on staff and winning new business.
“Our ultimate asset is our staff. I’ll be looking forward to speaking to all my colleagues about how we enhance their working lives. That comes down to competing and winning,” he said.
“One of the reasons I’m so thrilled about this deal is that it opens up the possibility to go out and win business. You will struggle to get me away from the front end of that.”
