Merged Firms To Operate as Savills Studley in U.S., Deal Expected to Close by End of May
London-based Savills is set to buy Studley, the independent U.S. commercial real estate services and advisory firm specialising in tenant representation, for up to $260 million (£154 million).
Founded in 1954 and headquartered in New York City, Studley is a privately owned firm employing over 400 commissioned brokers and 175 support staff in 25 offices across the U.S. Its largest offices in New York City, Washington D.C., Southern California (LA), Chicago and Houston.
In addition to occupier-related services, Studley has a capital markets team based principally in New York City. Since completing a management-led buyout in 2002, the firm has been owned by its 139 partners.
The acquisition of Studley will provide Savills with a significant U.S. footprint and a platform for further growth both in the U.S. and through Savills existing businesses in Asia and Europe.
The deal had been tipped in the U.S. media at the end of the year. Matthew Purser a senior member of Studley's UK team joined Savills' tenant representation team earlier this year.
Savills said the combination of the businesses will strengthen its position "as a leading advisory business focused on the world's key cities and capable of offering clients a broad suite of transaction advisory and project management services".
For the year ended 31 December 2013, Studley's turnover was $233 million, adjusted EBITDA was $18.4 million and pre-tax profit was $6 million (unaudited). In addition, Studley owns a 49% stake in AOS Studley, a French, EMEA-focused tenant representation and project management business.
The transaction will be implemented by way of a merger agreement, under the terms of which Savills will pay up to $260 million in cash, promissory notes and shares, which represents a present value of $224 million (at Savills weighted average cost of capital) reflecting the substantial deferred element of the consideration. In addition, Studley's staff will be eligible for a performance-related cash payment of up to $25 million in March 2018, subject to the achievement of certain earnings growth targets measured over the three financial years to 31 December 2017.
The cash portion of the initial and deferred consideration will be funded from Savills' cash and banking facilities.
In a statement announcing the merger agreement, Savills said: "The transaction provides Savills with a strong platform in the U.S. from which it can continue to grow its business. It will also leverage and strengthen Savills global platform, including its leading transaction advisory, consultancy, property and facilities management and investment management businesses. There are expected to be some limited integration savings, principally in relation to property costs, associated with the combination of Savills current capital markets businesses in New York City, Washington and Southern California, into the Studley organisation."
After the acquisition, the group will operate in the U.S. under the Savills Studley brand name and existing Savills branding arrangements will continue for the rest of the world.
Studley's Chairman and CEO, Mitchell Steir, and President Michael Colacino, will both act as alternates on the Savills Group Executive Board. In addition, Steir will continue as chairman and CEO, and Colacino as president, of Savills Studley.
The merger, which is subject to a vote of Studley stockholders, is expected to close on or around May 30, 2014. As at today's date, Savills has received irrevocable undertakings to vote in favour of the transaction from holders of 78% of the shares of Studley.
The transaction is anticipated to produce an internal rate of return materially above Savills weighted average cost of capital and is expected to enhance Savills underlying earnings per share in the first year.
Jeremy Helsby, Group Chief Executive of Savills, said: "Studley is recognised for its exceptional tenant representation expertise and is the leading player in markets throughout the United States. The combination of Studley and Savills represents a unique opportunity which not only provides us with a significant platform for growth in the US, but also enhances our offering to clients worldwide allowing us to provide a truly global service."
Mitchell Steir, Studley's chairman and CEO, added: "This is a great opportunity for us to build on our strong position in the market and benefit from being part of one of the leading global brands in the industry.
"We are delighted that we will have a stronger platform to continue our growth with a partner that shares our commitment to exceptional client service. Studley and our clients will benefit from being part of an international firm with the ability to capitalise on cross border opportunities in Europe and Asia."
Paul Norman is the news editor for CoStar U.K. and based in London.