C&W eyes new technologies and expanded services following IPO

Cushman & Wakefield and its key shareholders TPG, PAG Asia Capital and Ontario Teachers’ Pension Plan Board aim to use the proceeds of the company’s IPO this week to reduce its debt and make new investments, the company’s Global President John Forrester told PropertyEU in an interview.

‘We have taken a further step in building a world-class fully-integrated company with a strong balance sheet and plenty of potential to expand our services and introduce new technologies to our clients,’ Forrester said in a telephone call from New York.

The company aims to grow via selective acquisitions and autonomous growth, he added.

Shares in Cushman & Wakefield plc rose almost 5% on the first day of trading on Thursday following its IPO on the New York stock exchange. The company raised $765 mln (€657 mln) following the flotation of 45 million of its ordinary shares at a price of $17 per share, midway between its targeted price range of $15-$18. The company said it would use the net proceeds to reduce outstanding debts related to its acquisition of Cassidy Turley and for general corporate purposes.

Earlier this week it emerged that one of China’s leading real estate companies China Vanke bought a 4.9% stake in advisory firm Cushman & Wakefield in the run-up to its IPO. The company paid $175 mln for the 10.2 million shares through a private placement.

Integration generates losses
Cushman currently has 48,000 employees in about 400 offices in 70 countries, according to its IPO registration statement. Its revenue reached $6.9 bn in 2017, up from $6.2 bn in 2016. However, the company recorded a net loss of $221 mln in 2017 due to the costs of the integration of DTZ. Following its IPO, C&W is valued at around $3 bn, but this is virtually equalled by a debt of some $2.6 bn. The company’s indebtedness is so great that it was mentioned as a risk factor in the prospectus for the IPO.

CBRE generated revenue of $14.2 bn last year, while JLL's revenue came to $7.9 bn. 

Shortly after the current majority owners acquired Cushman in 2015, they appointed real estate veteran Brett White as CEO to manage the takeover and integration of DTZ and US-based Cassidy Turley. Prior to joining C&W, White worked for almost 20 years for CBRE, the last seven as CEO, and he played a key role in the IPO of that company in 2004. He left CBRE in 2012.

After White took the helm at C&W, the competition with its two key rival CBRE and JLL intensified. The key question was whether White and his team would be able to successfully integrate the three companies Cushman, DTZ and Cassidy Turley and improve the company's profit margins before the end of the current real estate boom. There is still potential to realise that goal. In the past four years, C&W has seen its profit margin rise from 7% to 10% before interest, tax and amortisation as earnings grew from $351 mln in 2014 to $529 mln last year. By contrast, CBRE's comparable profit margin is 18%.




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