COMMENT: GVA’s highly respected professional services side business that provides steady income, its trusted status amongst the most important public sector clients and genuinely strong regional presence makes it an attractive proposition on paper, says EG’s head of news and finance David Hatcher.
EQT has appointed advisers to market-test appetite for the business but is now the best time to be selling a UK property services business?
The UK hit the headlines last year when it was surprising on the upside with weak sterling prompting investment volumes to soar.
Volumes eased off in Q1 and are generally expected to stay that relatively subdued for the rest of the year as Brexit comes ever closer in to view. With that in mind it will be a bold business that makes a bet as big as this on the UK.
Given GVA’s stature, many fellow agents know they have to give it decent consideration.
In different circumstances Cushman & Wakefield, a long-term admirer of GVA, would be virtually nailed on to buy the business but with Cushman’s impending IPO it seems shackled.
The chatter around the IPO at MIPIM was deafening but it has since subdued slightly and while it is possible that buying GVA pre-IPO could ultimately make Cushman a more attractive proposition to the listed market, it would mean huge disruption in the short-term.
Lambert Smith Hampton held talks with GVA last year to try and bring the businesses together, backed by Toscafund.
There are major geographical overlaps and no doubt there would be some serious cost-cutting were the deal to ever happen but there is sound sense in combining LSH and GVA’s public sector clients to become arguably the industry leader in that area.
The major stumbling block is whether LSH and Tosca could get to the circa £200m price EQT would likely be happy with.
CBRE (provisional) and JLL (more serious) both showed interest in the wider Bilfinger property and construction business that GVA was part of when it was sold last time around.
The attraction to GVA’s recurring income would be in line with the push into consultancy that CBRE in particular is making and the sort of cashflow is the type that listed shareholders like to see.
But the proposition is different this time, without the Bilfinger FM function, and GVA is now a pure UK business. Could CBRE and JLL’s US bosses stomach it given the political climate and market uncertainty?
Both of the top two have been quieter on the acquisition front in the past year, perhaps with a sense of caution around the market being late-cycle.
BNP PRE has put a marker in the ground with its acquisition of Strutt & Parker and there could be a sense of in for a penny, in for a pound.
The more transactional focus of that business could compliment GVA but the opportunity might have come too soon for a business still bedding in the previous deal.
Newmark Group has long held aspirations to have a true presence in the UK over and above its alliance with Knight Frank but it is thought a transactional-focused business would be considered more appealing.
Colliers International and Savills are understood not to be potential buyers with concerns aplenty around the scale of overlap.
Canada’s Avison Young, which has been making bold moves since entering the UK in 2014 through buying strong regional or sectoral businesses, could be an interested party but may not have the firepower to buy a business the size of GVA with its employee-owned structure, despite being part-backed by PE firm Tricor Pacific Capital.
There is another nuance in GVA being swallowed up by a big beast: senior management is proud of the brand of the business that is more than 200 years old. EQT could ignore this and simply sell to the highest buyer but if the big boys know senior management will be disgruntled it makes the proposition less attractive.
Could an FM business come into the UK as a new entrant? It’s not impossible but GVA does not have a renowned corporate occupiers business so the synergies are not overwhelming and these DTZ/UGL-style do not always work out as expected.
GVA has been there before too and chief executive Gerry Hughes himself said only in January that what the business does “is a long way from a blue-collar worker changing the toilet roll. We’re not in that place and we’re not following the herd… for us it isn’t credible.”
And then there’s PE. A late-cycle move for a Steady Eddie business like GVA might not seem like the most obvious play but in a world where reliable, recurring income is becoming increasingly highly valued it is far from impossible that a PE firm could come in and look to move the needle by bulking up the numbers with big investment hires.
GVA may be a widely admired business but given uncertainty around the point in the cycle, politics and particular prospective buyers getting bidders to a price EQT is content with will be no straightforward task.
To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette
