Return to search

The time is ripe for full M&A stake deals

2021 has seen notably more M&As involving complete acquisitions compared with partial stakes. That trend will accelerate as the post-pandemic market bifurcation continues.


2021 is proving to be a record year for private real estate M&A activity. According to a mid-year report by the New York-based advisory firm Hodes Weill & Associates, M&A activity is up 45 percent year-on-year, with 16 transactions completed so far.

Heightened trading in general won’t come as a big surprise to PERE readers. As markets continue their post-lockdown recovery momentum, firms are resuming business plans and strategic decisions with renewed vigor. What is more notable, however, is the type of M&A activity trending currently.

As much as half of the transactions were 100 percent sales in H1 2021, with the rest a mixture of minority and majority sales. Last year, only 17 percent of the total volume were full takeovers. That more buyers and sellers are taking longer-term decisions about the directions of their businesses reflects broader shifts in the industry, especially as the world emerges from a black swan event.

As Doug Weill, Hodes Weill’s managing partner, told PERE, even though many of these firms would have been in a growth mode before 2020, covid resulted in a mindset shift, forcing them to think about how best to position themselves during a highly uncertain time.

The pandemic has only accelerated the consolidation trend in the industry. As the big managers continue to get bigger and raise a disproportionate share of institutional capital for record-breaking funds, the market for mid-market and boutique managers is shrinking. By joining a larger, more-established platform, many of these firms gain access to infrastructure, resources and a wider pool of capital, as well as solve succession planning issues as their founders reach retirement age.

Los Angeles-based manager Black Creek Group, for example, was understood to be only looking for a minority investor when it sought an equity infusion in 2020. Eventually, however, the firm agreed to a full takeover by Ares Management this May because of the continued growth prospects offered by Ares’ institutional relationships and global brand, as chief executive Raj Dhanda told PERE at the time.

On the other hand, many of the buyers taking complete ownership of a business are seeking to expand into new strategies, sectors and geographies, and quickly gain scale. Toronto-based manager Slate Asset Management’s acquisition of Annaly Capital Management in April allowed the firm to add real estate debt to its product offerings in North America and Europe. Similarly, for Swedish private equity firm EQT, purchasing US real estate manager Exeter Property Group – and gaining access to its $7.7 billion US portfolio – was a faster way to expand its North American exposure instead of doing it organically.

The uptick in full stake sales is also a reflection of the firms being sold. Oxford Properties, for example, acquired 100 percent ownership in a manager for the first time with its purchase of M7 Real Estate. James Boadle, Oxford’s senior vice-president of Europe, said at the time that the pension plan ideally wants full ownership of a firm because of the control it gains over the platform, but managers in which Oxford previously purchased partial stakes were too large for the investor to buy on its own. M7, however, was “within our sweet spot in terms of check size.”

For a lot of these takeovers, however, there are no public details on pricing, so it is hard to know the extent to which the pandemic might have skewed valuations in favor of the buyers. Once the market fully recovers from the crisis, however, the consequent repricing will determine whether firms continue to find it financially advantageous to make 100 percent acquisitions.