DTZ’s Deal for Cassidy Turley Shakes Up Service Sector, Analysts Say

By Gail Kalinoski, Contributing Editor

A deal to buy Cassidy Turley is a good move for both the commercial real estate services firm and the international private equity investment consortium behind the DTZ acquisition if they want to compete on a global level with CBRE Group Inc. and JLL, industry analysts and consultants told CPE.

“It was the right decision for both sides,” Brandon Dobell, a partner & group head of global services at William Blair & Co., said of the plan announced Monday afternoon for an affiliate of DTZ Investment Holdings to acquire the Washington, D.C.-based services firm for an undisclosed amount soon after it closes on the $1.2 billion purchase of DTZ from UGL Ltd. of Australia.  “DTZ is strong in Europe and a very good franchise in Asia with minimal business here. Cassidy Turley is primarily a tenant rep and property manager.”

Dobell, who covers real estate services, said Cassidy Turley “had to find another way to get bigger on their own or join another organization.”

Jahn Brodwin, senior managing director of FTI Real Estate Solutions, agreed. “It makes sense because (Cassidy Turley) didn’t reach the critical mass they had hoped for. By consolidating, they get that critical mass really quickly,” Brodwin told CPE. “It will give them a larger international platform.”

The consortium of TPG Capital, PAG Asia Capital and the Ontario Teachers’ Pension Plan should complete its acquisition of global property services firm DTZ in late October. The Cassidy Turley deal, which is contingent on the conclusion of the DTZ transaction, is expected to close Dec. 31, according to a statement.

“Following a period of intensive mutual due diligence, we are confident that this is an excellent cultural fit as well as an opportunity to partner with a global brand,” Joseph Stettinius, Cassidy Turley CEO, said in the statement.

Stettinius said the “combined companies will create a game-changing organization – not only for us but for the entire industry.”

Ben Gray, TPG’s managing partner for TPG, stated Cassidy Turley would “complement DTZ’s existing very strong businesses in Asia and Europe as well as DTZ’s existing U.S. businesses.”

The combined company, which will be branded as DTZ, will have revenues of more than $2.9 billion and more than 28,000 total employees.  Brett White, former CEO of CBRE Group, an investor in the consortium, will be joining the Board of Directors and become executive chairman of the new company in March 2015. Stettinius will become CEO of the Americas and Tod Lickerman will continue in his role as Global CEO of DTZ.

Dobell said it was smart of the TPG-led consortium to stress White’s involvement and reiterate that Lickerman was staying on as Global CEO. “No one is going to want to join a firm if they don’t know who is at the top,” he said.

White helped CBRE through several major milestones, including a shift to public ownership in 2004 and then three large acquisitions: Insignia/ESG Inc. in 2003, Trammell Crow Co. in 2006 and ING REIM in 2011. Dobell said combining Cassidy Turley and DTZ “puts them probably tied for third with Cushman & Wakefield.”

“They’re still behind JLL by a billion-plus in revenues, and behind CBRE by a lot,” he said. “But this puts them in a position where they can go to multinational clients and say, ‘We’ve got you covered in the U.S.’”

Dobell said the consolidation will give the combined firm financial stability along with an easier time recruiting service lines and expanding in geographical areas where they were undersized. “If they can keep the people that are good producers and have good relationships and manage all the issues that come with combining two companies, they’re going to be in a good place,” he said of the new company.

Both Dobell and Brodwin had previously predicted the investment consortium would be looking to make acquisitions quickly to begin growing DTZ, particularly in the United States. Cassidy Turley, created in 2008 by four original partner firms and expanded over the years through mergers and acquisitions with local and regional companies, had been rumored to be in play and so it was a logical choice to be merged into DTZ, they said. Cassidy Turley’s most recent acquisition came last month when it expanded its presence in North Carolina by purchasing Synergy Commercial Advisors.

“Cassidy Turley was playing in a field where you have to be small and highly specialized or you have to be really big. Cassidy Turley wasn’t either of those,” Brodwin said.

He expects there will be more consolidation within the commercial real estate sector, which has already seen Savills acquire Studley for $260 million in June.

Backed by the financial stability of its new private equity owners, DTZ is likely to be looking for more acquisitions, Brodwin said.

“I would imagine they would continue to look for opportunities to continue building out their platform for what they view as missing pieces in their puzzle,” he said.