With headquarters in Texas and California, the US-based global private equity investment firm could finally crack with Exor SpA-owned Cushman & Wakefield Inc. after much speculation. The buyout has been confirmed to be extremely promising as it will lead to combining of Cushman with DTZ to create a much stronger company to be able to compete with market peers CBRE Group Inc. (CBG, Financial) and Jones Lang LaSalle Inc. (JLL, Financial), which are the top two firms in the market.
How DTZ and Cushman came together
TPG Capital (TSLX, Financial) bought DTZ at the end of 2014. Further, the latter took control of Cassidy Turley, which is a brokerage firm with strong presence in the Americas, by completing its acquisition. This way, a global top-three commercial real estate services form was formed with annual revenue of about $2.9 billion as per a report by Time. As per the report, DTZ held more than 50% market share for commercial property sales China and was also ranked at the third spot in that category in United Kingdom.
On the other hand, New York-based Cushman posted revenue of $2.85 billion last year. An increase of 33% was recorded in the net revenues last year taking it up to $61.6 Million. From the Asia-pacific region, Fee and service revenue got a boost of 25%. Exor who hired Goldman Sachs (GS, Financial) and Morgan Stanley (MS, Financial) last year to find a suitable buyer for Cushman owns 81% stake in the company. TPG was also competing with a line up of other major private-equity and important bidders interested in Cushman’s buyout. Any of the representatives from Cushman, Goldman Sachs or TPG gave no official comment. Although there was a caution statement too sent out to markets that the deal might or might not materialize. However, the news is confirmed that the deal has finally taken off in favor of TPG.
Details of the deal
The acquisition done by TPG includes cash and liabilities of Cushman & Wakefield as well as an opportunity to fulfill its goal of creating world’s second largest commercial property services firm in terms of revenue. The Cushion & Wakefield as a topping over DTZ and Cassidy Turley working together will make a high profit making combination for TPG yielding high revenues for the company. The combined firm will now be known as Cushman & Wakefield and will have revenues amounting to $5.7 billion each year. The company with 43,000 employees will now hold the second position after market leader CBRE and will leave key rival Global Heavyweight JLL behind in the race. The combined skills of the three companies as well as their geographical reach is surely going help the company grow on a fast pace.
The additional $1.3 billion will be provided by DTZ in the US Term Loan B market with UBS (UBS, Financial), JP Morgan (JPM, Financial), Credit Suisse (CS, Financial) and Bank of America Merrill Lynch (BAC, Financial) (MER, Financial). While DTZ will also tip in equity, it will additionally be taking the responsibility of the loan over its already existing $1 billion of facilities in place.
For Cushman & Wakefield, the deal has yielded around $722 million of total capital gains. The company had a revenue of $1.5 billion when Exor took control in 2007 and in 2014, when the company was decide to be put up for sale, revenues were $2.1 billion which generated an adjusted EBITDA of $175.4 million. During the acquisition of DTZ by TPG, the latter had formed a consortium with Hong Kong investment manager PAG and Canada’s Ontario Teachers’ Pension Plan to make an acquisition worth $1.22 billion in June 2014.
Parting words
The newly formed company will now have a widened presence and a strengthened market share in New York, Los Angeles, Boston, Chicago, San Francisco, San Diego, Paris, London, Benelux, Mainland China, Hong Kong, Tokyo, India and Indonesia and also in facilities management in Australia.
