Toscafund Asset Management is in talks with Lambert Smith Hampton to buy into the business and launch an assault on the UK property advisory sector.
The $4bn UK private equity fund had been in discussions with LSH owner Countrywide about funding a deal to merge it with EQT-owned GVA – and while talks over a merger are not currently live, Tosca is maintaining its interest in LSH.
Countrywide is under pressure after last month issuing a profit warning which led to the resignation of its chief executive, Alison Platt. The company subsequently stated its sales and lettings business had “lost focus”. It is due to update the market on its future strategy in its preliminary results on 8 March.
It is understood that Tosca is interested in turning LSH into a more multi-service operation. This could be done through also investing into estate agent Hamptons International, LSH’s sister business under Countrywide’s ownership, and integrating it with the commercial adviser.
Bringing the two businesses together would provide a “one stop shop” for clients, particularly in the public sector. LSH advises on a large proportion of public-sector development and regeneration work, much of which involves large residential elements. Integrating the expertise of Hamptons as well as the selling agency element could be highly synergistic.
Hamptons is considered a prestigious brand. It has a particular focus in the South East, and a large proportion of its business comes from sales approaching £1m. The two businesses have historically been closely tied. Hamptons was bought by the then Lambert Smith & Partners in the mid-1980s and helped give the company its name, before being jettisoned in 1991 – ultimately coming under Countrywide’s ownership in 2010.
Countrywide also has an affordable housing advisory business as well as an estate management team, which could be used to target the PRS market. These could be integrated into any combined business and would appeal to current investor trends.
Should a corporate deal for LSH be undertaken with Tosca, Countrywide is likely to be keen to retain a stake in the business to share in any future upside, as had been proposed in the prospective merger deal with GVA.
Tosca finances its deals using a variety of funds or bespoke clubs, with chief executive Martin Hughes often putting in substantial upfront cash before selling down equity. Last September the company launched a €300m fund to invest in unlisted, small and mid-cap financial and business services companies.
Led by chief executive Ezra Nahome, LSH has been one of the best-performing elements of the Countrywide business in recent times. In January in a trading statement the company said that it expected to report 14% growth in EBITDA for LSH during 2017 at around £36m.
Were Tosca to agree a deal to invest into LSH, it would have the firepower to look to consolidate further in a sector where margins and pricing are coming under increasing pressure. As well as targeting a deal with GVA, Nahome has also made approaches in the past for Cluttons and has successfully acquired companies including BTW Shiells, ES Group and Tushingham Moore.
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