EUROPEAN NEWS: It’s complicated

Last month came news that the management-led buyout  of Valad Europe had failed. According to the firm’s parent company, Sydney-based Valad Group, the MBO proposal had been “withdrawn” and, as a result, all discussions with the MBO group in relation to the potential acquisition of the European business had ceased. The firm refused to discuss the reasons behind the collapse, leaving speculation that it was the result of withdrawn funding.

The failed MBO put into focus the current state of corporate merger and acquisition activity in property fund management.

Had the news been different, Valad Europe, the largest part of Valad Group with just over €5 billion in assets,
would have become the latest firm to either spin out, be taken over or sell a stake.

Indeed, there have been at least 23 instances in Europe of management buyouts, takeovers or partial sales of platforms since June 2009, according to data supplied by Jones Lang LaSalle. Though by no means an exhaustive list, the table to the right does highlight the different drivers for corporate activity in the industry, ranging from financial organisations viewing real estate management as a non-core activity to groups that had retrenched internationally and businesses that questioned whether they are of the right scale for their ambitions.

Julian Schiller, national director of indirect investment at Jones Lang LaSalle, believes the next theme to emerge will be firms faced with the choice of either downsizing or “huddling together” in order to survive.

“Where we are going to see a change in the market, I think, is at firms that have predicated their business model upon raising one fund after another,” he said. “The fundraising market is really challenging, and a few groups are going to start looking around at their options when it comes time to raise their next vehicle.”

Schiller noted that he frequently is called by groups searching for companies to acquire. Those groups typically ask which funds can be bought, which ones are in distress or which management contracts can be acquired. “But it is not as though there are hundreds of situations we can reel off,” he said. “Some of them are pretty complex situations and can down to chemistry and the right timing.”

According to Schiller, one of the biggest issues is that fund managers that would consider selling themselves or merging into another entity have often come out of institutions or other firms, and their reason for coming out of them was to gain independence and the ability to control their own destiny. “The problem for acquirers, particularly the larger firms, is that groups they may want to acquire I don’t think are ready to be acquired,” he said. “That means there are very few opportunities.”

Consolidation act

In the last two years, at least 23 firms or their funds have been taken over or have been the subject
of a capital injection or management buyout

Ongoing Acquisitions / Mergers
Seller Buyer Date Amount reported

HSBC Specialists Investments Management Ongoing n/a

ING REIM CBRE Investors Feb-11 $940m

Completed Acquisitions / Mergers
Company Sold Buyer Date Amount reported

Prima Real Estate Hines (Italy) Mar-11 Undisclosed

First Atlantic Real Estate Fondi Immobiliari Italiani Jan-11 Merger

Enskild Kapitalforvaltning Catella Jan-11 SEK 28 m

LB Immo Invest Patrizia Dec-10 Undisclosed

Bank of Ireland Asset Management State Street Oct-10 €57 m

Pirelli & C. Real Estate Prelios Oct-10 Spinoff

Europa Capital (75% stake) Rockefeller Group Oct-10 Undisclosed

Close Brothers Asset Management (RE fund arm) Alpha Real Capital Oct-10 Nominal

Montier Partners Stenham Asset Management Sep-10 Undisclosed

Europolis CA Immobilien Jul-10 €272m

Alliance Capital Partners BMB Group Jul-10 Undisclosed

Braemar Group Brooks Macdonald Group Jun-10 £4m

KBC Asset Management Management Jun-10 Undisclosed

Catella Scribona May-10 €43m

Cordea Savills (final 40% stake) Savills Mar-10 £15.4m

Belgravia Asset Management Palmer Capital Jan-10 Undisclosed

GPT Halverton Internos Dec-09 Reverse Premium

Societe Generale Asset Management Credit Agriocole Structured Asset Management Dec-09 Merger

BlackRock (fund of funds business) Aviva Investors Nov-09 Nominal

Protego Cornerstone Real Estate Advisers Nov-09 £25m

Puma Brandenburg Shore Capital Group Jun-09 £82.9m

Source: Jones Lang LaSalle