Is Avison Young right to buy GVA?

There are many, many reasons why a deal between GVA and Avison Young makes sense. And maybe just one reason why it does not.

Avison Young has flexed its muscles in the UK since 2014, picking up eye-catching niche firms such as Wilkinson Williams and WHR, but in buying GVA it has bench-pressed 15 times its body weight.

What is good for all concerned about that is that there is little to no overlap. Many of the businesses that Avison Young has already bought in the UK have been focused on transactions, whereas GVA is more centred around professional services.

That combination of hefty but unpredictable fees and lower margin but more reliable, recurring income streams makes for a blend that can help ride markets good or bad.

It should mean there is relatively little blood on the street in terms of redundancies. This surely would have not been the case if Cushman & Wakefield bought GVA, particularly within its geographically similar UK regional offices and also with many of Cushman’s transactional teams arguably being stronger than those at GVA.

The GVA management is also needed far more in the case of the Avison Young deal, which in UK terms amounts to a reverse takeover, than it would be within Cushman’s substantial and robust post-IPO structure.

For GVA, the deal gives the company a permanent and logical home.

After the always transient state of private equity ownership under LDC, and the somewhat uncomfortable adjunct of being part of a construction and engineering firm that then also became owned by private equity, those working for the firm will now truly be at the heart of the long-term objectives of its owner.

With new backing from fund manager CDPQ, Avison Young has the ability to continue expanding internationally and in time try and tie in the UK business more closely to a global network and the advantages it brings, as well as attracting new and rewarding existing staff.

Massive call

So why would it not make sense?

It’s that same old lingering word on the lips of the nation. Buying a UK property service business less than five months before Brexit is a massive call.

Could transactional volumes fall off a cliff at a time when fees in the sector are already under pressure? It is not impossible.

The management of Cushman have long been admirers of the GVA business, but stuttered as a result.

EQT is getting out after just two years – quick even for a private equity firm. With its real estate investment division also yet to make a notable purchase in the UK since it was established in 2015, despite being located in London, it is probably fair to say the firm’s house view is also somewhat cautious.

But such concerns do not register for Mark Rose, Avison Young’s bold chairman and chief executive, as avid listeners to EG’s podcasts will know.

Back in August after the purchase of Wilkinson Williams, he told me: “I was here on the day of the vote and wrote that afternoon that this would be the greatest non-issue since Y2K. When you have a large economy you have to trade with it. [Brexit] allows for dislocation and interruption in thought processes and those who get scared usually get left behind. We choose to seize the moment if there is a bit of volatility.”

There is no doubt that Brexit has brought opportunity for Avison Young, and that if not for the political situation it would have had to pay a higher price and would likely have come up against more rival suitors for GVA.

Will Avison Young be rewarded for the risk it is taking at this point in time? The answer to that question may be in the lap of the political gods but, whatever happens with Brexit, both the buyer and those working for the seller can be assured that the deal, at least in terms of fundamentals, makes great sense.