Cushman & Wakefield is understood to be interviewing advisers to assist it in a possible strategy to take the company public. The discussions could result in the company pursuing an initial public offering later this year.
An IPO would allow the company’s owners, private equity group TPG, PAG Asia Capital and Ontario Teachers’ Pension Plan, to cash in on their investment. At the same time, C&W would be able to issue stock in order to grow.
The investment consortium led by TPG acquired the business from Italy’s Exor SpA in May 2015 for around $2bn (£1.4bn). On the basis that its listed peers, such as CBRE, Savills and JLL have an earnings multiple of around 0.92, , on a price/sales basis, C&W’s stated $6bn global revenues would imply an equity value of around $5.5bn.
Solidify market position
Why pursue an IPO now? “Going public would solidify Cushmans’ position in the market, alongside JLL and CBRE,” said one head of a UK private real estate agency.
Another former real estate agency chief executive said: “An IPO would give it the opportunity to become another big beast, and there could be a very interesting competitive advantage. CBRE currently has a very large per cent of the market and you need competition, you need to have a choice in the world of professional services.”
If a listing goes ahead, it is expected to take place in the US, where the company is headquartered and there is thought to be good investor understanding of the type of proposition.
“This year we’ve already seen some volatility, which has had a bit of an impact on the market, but IPOs will still happen,” says Lucy Tarleton, a director in the IPO originations team at PwC. “US IPOs are still occurring, it is a much bigger market compared to the UK.” She says companies considering an IPO need to factor in the cost of looking at it, getting it to the market as well as the time taken by senior management out of the business to go on investor roadshows and meet with investment bankers.
How could C&W be preparing? The global management restructure announced in December, which saw John Forrester take on the role of global president to ensure the company’s 45,000 employees in more than 70 countries offer a co-ordinated service, could be interpreted as part of C&W’s preparations for an IPO.
Investors, before subscribing to an IPO, would want to see a management team with a track record of investing, a clear strategy for expanding the company and clear evidence that the issue is not overpriced.
“An IPO would give C&W the opportunity to become another big beast, and there could be a very interesting competitive advantage”
The correct leadership team would need to be in place to manage the requirements of a public company, and key hires such as JLL’s Andrew Hawkins to the London capital markets team and Eastdil Secured’s Doug Harmon and Adam Spies to the New York investment team are seen by some as fulfilling that objective.
One senior C&W employee said there has been evidence of the firm tightening its bottom line, which is important ahead of an IPO when management teams need to be prepared for high levels of scrutiny from the investor and analyst community. Cushmans’ MIPIM representation was down to 92 delegates this year (compared with more than 200 each from Savills, CBRE and JLL), and its crowning advertising slot at the top of the Palais was replaced by WeWork, which market observers speculated could demonstrate natural cost-cutting needed to create an attractive equity story ahead of an IPO.
The company has also needed to decide on its USP. This was defined by head of UK & Ireland George Roberts in an EG interview in December as giving expert advice on the end user of real estate. “We have a tremendous opportunity in particular in our firm, to position ourselves differently from others by having the best insight into what these end users are saying,” he said.
Stellar year for agencies
What could go wrong? The agency community had a stellar year in 2017, despite global political uncertainty, with investment volumes reaching the second-highest level in a decade at $873bn, according to Real Capital Analytics. This would help C&W make itself look like an attractive proposition.
However, the outlook for 2018 is less certain, with a general view that we are late cycle, and there are uncertainties including interest rate rises, China’s new regulatory regime and US policy reforms that could affect investor appetite and occupier sentiment. “As with most things, the time to do it was last year,” joked one senior executive.
A C&W insider said the global restructure was in fact the result of a natural review to ensure the best structure was in place to support the growth of the business, two years after the merger between Cushmans and DTZ.
“A lot of people are looking in the tea leaves at the moment and trying to make predictions,” he said. “We are just doing what the other firms are doing in line with where we are in the cycle, and creating the structure that unlocks the potential of the business.”
A Cushmans spokesman declined to comment on the possibility of an IPO.
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