Those who speculated that BNP Paribas Real Estate was the predator that forced DTZ into a stock exchange announcement this week were proven right a day later.
But anyone who supposed it was a move by SGP, the company’s majority shareholder, were not wrong either.
If all plays out as anticipated, BNP PRE will secure the acquisition that catapults it into the big league, confirming an expectation that has lurked in the shadows for more than a year. Meanwhile, the Mathy family, who own SGP, will secure their exit by fully acquiring DTZ and then flipping it to the French-bank-backed agent.
If the deal goes through – and that’s a big if – it would bring to an end a troubling period for DTZ.
That’s an understandable incentive; the wealth-creating opportunity for senior executives is another potential driver. Chief executive Paul Idzik, for instance, could still receive a payment of 1.75 times his base salary, which is believed to be £300,000, if the firm is sold.
But why would BNP PRE want to dilute its performance by taking on a loss-making business? Three reasons:
In the UK, understandably, we tend to look at the world through a UK prism. So BNP PRE is only the 12th largest agent by turnover. But it is the second largest by turnover across Europe. And unlike its rivals it continued to be profitable throughout the recession.
Contrast that with DTZ, still a bigger firm in UK terms. It is preparing its full-year results at the moment, having closed its year end two weeks ago. And the company is expecting to hit its full-year forecast, having made a £6m pretax loss in the half year to 31 October. At the time, chief executive Paul Idzik said DTZ was “a work in progress” and the company was now in “growth and renewal mode”.
BNP PRE must see firm evidence that this is the case, even if it is happening more slowly than anyone inside DTZ would like.
The second reason is scale. In other sectors of professional services, scale matters. In consultancy there are global colossuses whose brands visually assault you the moment you step off a plane at an international transport hub. In law, top-tier businesses will only deal with the Magic Circle; in accountancy, it’s the Big Four or nothing. And so on.
The third and most interesting reason is the hotspots of growth within DTZ. In Asia Pacific, the firm’s second largest market, it grew revenues by 13.4% in the past half year. Within that, growth in its Chinese business is believed to be even faster at 25% a year. Should that rate continue, it would be bigger than the firm’s UK business in just two years.
Given the extent to which every agent is currently looking east, that presents a formidable platform on which an owner with a sufficiently robust balance can build.
A deal – this deal, or another deal should this one fail to complete for whatever reason – would bring much-needed certainty to DTZ.
The company’s recent travails have been disruptive. Clients regularly ask ahead of pitches about the health of the firm and the security of its key people. “Will they be there for the duration of the contract?” is a regular question. No matter that DTZ continues to enjoy a low attrition rate among its well-regarded team, it is the sort of conversation you hope not to have to have.
Perhaps that will soon become a thing of the past and DTZ can look to the future with greater certainty.
