A new major listed estate agency worth at least £100m is planned to be built, created from individual agents put together to form a large single group. The plan is to float the combined business within two years.
The model appears to be to offer an alternative exit to owners of estate agency businesses that are struggling. The owners would not get money in the sale, but shares in the eventually listed business. The aim is that on listing, they would then cash in – assuming that the floated business succeeds.
The firm behind the initiative is Kleinsman Global, said to be a US private equity business with 250m euros behind it, and owned by former UK estate agents, brothers Paul and Ben Seabridge. A search on Companies House for Kleinsman Global comes up with the name of JWD 2 Capital Limited, with an address in Wyoming, and listed as a director appointed last November.
Paul Seabridge told EYE last night: “Yes – we are building an IPO in this space.”
EYE understands that there have been several meetings involving agents who may not have known each other before, and who are now subject to non-disclosure agreements.
Seabridge told us: “The model in short is we are looking to group together well run, profitable, debt free agencies to form a larger group which will then list.
“What is unique about the model is that rather than exit, each business owner will take shares in the IPO and continue to run their successful businesses.
“We are looking to raise around £15m on the markets and this capital will be spent by those businesses to buy up those agents that are struggling.
“The plan is to create a £100m market cap business inside two years by bringing together the best in class.”
Asked whether the plan would be to do this just once in the agency sector, Seabridge said this was the aim, but added: “We are also doing this in a number of other sectors not related to real estate – such as telecoms/IT, engineering, and training – for very similar reasons as to why we are interested in the real estate sector in the UK.
“Any industry where there is fragmentation, lots of change, barriers to entry etc, gives opportunity for consolidation and acquisition.”
In answers to other questions asked by EYE, Seabridge said that agency businesses are currently changing hands for 75% of what they were worth last year.
He said there is increased competition, from online agents, plus “talk of the big boys merging or carving up”.
He also said there is “lots of consolidation happening” and that for good operators, there was plenty of opportunity to acquire agents that have not adapted to change. He said: “It’s a buyer’s market, definitely.”
If a new £100m estate agency were to emerge, it would compare with the current market capitalisation of Countrywide at around £263m. Foxtons is worth around £202m, while The Property Franchise Group is worth £36m.
JWD Capital Partners is not alone in wanting to consolidate the industry but appears to be the only one taking this particular approach in estate agency.
There are concerns that putting together companies to form one listed firm in other industries may not always have worked out.
We were also told by one industry player that agents thinking of this kind of exit should do considerable research and take very careful independent advice.