Lambert Smith Hampton is nearing a deal to spin out of Countrywide and is plotting a merger with GVA.
LSH and Countrywide are in advanced discussions with a third-party private equity investor to move LSH out of the UK’s largest estate agency and provide additional equity that would allow it to grow the business.
It intends to put forward a formal proposal to GVA’s owner EQT for GVA to be merged with the new entity. The proposition is borne from talks held earlier this year over a straight merger deal.
The prospective deal would see the third-party investor buying into the newly created business, which would allow Countrywide to capitalise on the investment it made in buying the firm, while retaining a stake and some potential upside. The same would apply for EQT in the proposal with GVA.
No deal has yet been put forward to EQT, but if undertaken it would bring together two property advisory businesses known for their strengths in public sector consultancy, professional services and the UK regions.
A spokesman for GVA said: “We are flattered when any business expresses an interest in becoming part of GVA. We are very proud of our brand and market reputation. In line with our growth strategy we are actively seeking opportunities to expand our business, however no discussions are underway with LSH and Countrywide. We obviously cannot speculate on the future activities of other businesses.”
Swedish private equity firm EQT made its €1.4bn (£1.2bn) purchase of the broader building and facility segment of German industrial services provider Bilfinger last June, of which GVA was part. The broader business that was bought was subsequently rebranded APLEONA.
Any deal is made more complex due to Countrywide’s listed status and GVA’s previous owner Bilfinger being entitled to 49% of any resales proceeds made by EQT.
Countrywide has been considering a corporate strategy for LSH since the end of last year when it appointed Deloitte to undertake a strategic review. At the time it was looking to focus on its core residential estate agency business and was looking at selling off LSH and reinvesting the proceeds.
No appropriate bids were received, however, and Countrywide announced in July in its half-year report that it was to retain the business, saying: “We believe there are opportunities to further develop the business; our combined expertise and strength in the commercial and residential sectors, along with our national and local reach, will enable us to maximise future opportunities across the group.”
At the same time, the company also said that LSH’s year-on-year revenue was flat, that its EBITDA was down by 8% but that “our strong pipeline of both transactional and consultancy work means our teams are positioned well for the second half of the year”.
What would a merged GVA/LSH business look like?
If the two businesses were brought together it would create a platform that had substantial strength and depth in terms of its non-transactional, consultancy functions. While the two businesses focus on similar areas there is thought to be relatively limited overlap in terms of clients. In the public sector, for example, GVA focuses predominantly on national level clients and LSH on regional and local clients.
Both GVA and LSH employ around 1,500 staff each in the UK. LSH has 34 offices and GVA has 12. There is an overlap in 10 of the 12 locations, Liverpool and the City of London being the exceptions. The LSH business is led by chief executive Ezra Nahome and GVA by Gerry Hughes.
For the year to December 2016, GVA posted a turnover of £140m, according to Companies House. In 2015, the last available figures for LSH, it generated around £100m of revenues.
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