Marsh & Parsons, the London estate agents into which its boss Peter Rollings breathed new life after he quit Foxtons, is set to have new owners which could double the business.
Rollings will keep his stake in the company. But Irish property group Sherry FitzGerald, headed by chief executive Mark FitzGerald – whose financial clout helped bankroll the purchase of Marsh & Parsons in 2005 – wants to sell its 72% share in what has flowered into a highly successful company.
Several bid approaches have already been made although the business is not yet officially on the market. Rollings said yesterday that he hoped to have the information memorandum ready by early June.
The original Marsh & Parsons firm, which had a reputation for being solid but old-fashioned, was acquired first, followed by the acquisition of Vansons estate agents. The two purchases cost around £5m, Rollings said yesterday, rather less than has been widely reported in City circles although further investment had been needed.
Whatever the original financial investment by Sherry FitzGerald was, it will have paid off handsomely: its stake could be worth as much as £60m, or about ten times what it originally invested.
Going it alone was not a financial option for Rollings, who had never been given an equity share in Foxtons, where he spent 20 years and rose to become managing director after transforming its fortunes.
Frustrated, Rollings quit Foxtons, set on creating his own London-wide firm, specialising in middle to top-end properties and promising to give customers a ‘great experience’.
Jon Hunt, owner of Foxtons who had repeatedly refused to give Rollings an equity share, sold his firm shortly afterwards, in 2007, at the height of the market, for £375m. Yesterday, Hunt was named 79th richest man in Britain with a fortune of £875m – £215m more than he was worth last year in the Sunday Times Rich List.
At the time of the M & P deal, Sherry FitzGerald was riding high on the unprecedented Irish housing boom. Today, it remains the number one Irish agent, with over seven brands and 100-plus branches. However, the housing crash there has hit it for six, like all property businesses in Ireland. Sherry FitzGerald itself estimates that house prices have fallen over 51% since peak and over 13% in the last year alone. It projects further falls of over 18%. Transactions that the firm handles in Ireland were expected to be 4,000 last year as against 10,000 at peak.
By contrast, M & P has thrived as it makes the most of London’s boom. It has 14 branches in London and, helped by astute PR and a clutch of awards, one of the strongest reputations of any estate agent in the capital.
A new owner who buys the Sherry FitzGerald share could help double sales within five years. Cavendish, the corporate finance firm, is advising M & P on its options.
Yesterday, Rollings said: "Sherry FitzGerald have been magnificent strategic partners. I couldn't have asked for better. These are very exciting times, and with the London housing market as strong as it is, going for expansion makes a lot of sense."
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Comments
Mike: sorry, but I'm gonna pull you on this one...
"What has a luxury item that no-one needs got to do with something that everyone needs to survive?" Firstly, it is a sad fact that a house is NOT a necessity to survive. The evidence is out there on the streets of every major town and city in the world. That to one side, aren't you fudging the issue somewhat? Your stance is that you see a roof over ones head to be a necessity. Fair enough - o argument there - but one way or another there is no requirement to OWN that roof, surely?
"If a Rolls Royce were necessary for survival, you can be sure they would not be priced as they are." Absolutely - but in this instance my agreement is the last thing you want. IF, somehow, a Roller became invaluable to survival, AND they were in as limited supply as they currently are, then the 'value' of Rolls Royces would escalate EXPONENTIALLY. Only those who had the money to survive, would.
Ray's observation is entirely relevant, as it highlights the fact that people's aspirations control the prices of things just as much as their basic need.
@Ray Evans
You said:
"Should everyone be able to have what they want?
If one wanted a Rolls Royce should it be produced and priced so that they could buy it no-matter what?"
What has a luxury item that no-one needs got to do with something that everyone needs to survive?
If a Rolls Royce were necessary for survival, you can be sure they would not be priced as they are. You're muddying the water with an observation that is irrelevant.
Ray - As I think you know, the UK cycle has followed a pretty predictable cycle over 50 years. Average prices are collelated with average earnings. They are still at a very elevated ratio. This ratio is supported at the moment by the emergency interest rate the BoE are maintaining. But you have to realise how unusual and unsustainable that rate is in an rising inflation environment. I remember clearly when UK rates were hiked from 12% to 15% in 1990. I know you probably don't want to imagine this but it could returning sooner that you think. The 90% of UK homeowners on trackers will just be killed in that scenario - and because property is already so overvalued it is likely that it will correct (as it always does) to a multiple below 3 x average earnings at the bottom. Believe me, when you hear the words "this time it is different" you need to run for the hills!
To James Cornish
I get your point but it wouldn't quite work like that. It is unlikely that Sherryfitzgerald acquired a loan using Marsh and Parsons as collateral since that business has few fixed assets to guarantee such a loan. Therefore I assume Sherry Fitzgerlad is in a position whereby it is creaming off the revenue from it's best performing asset which is Marsh and Parsons in order to service it's debt burden in almost all other areas of the Sherryfitzgerald business. The resulting lack of reinvestment of Marsh and Parsons profits is probably causing some resentment amongst it's other (local) shareholders combined with the probability that Sherryfitzgeralds Banks are putting them under pressure to reluctantly dispose of its majority stake in Marsh and Parsons in order to produce some liquidty to better service Sherryfitz geralds debts and operating costs.
This scenerio could therefore present an opportunity to Peter Rollings and the other local Directors to only grand their Board Approval to an incoming Buyer in return for the local Directors/Shareholders to be granted an increased stake in Marsh and Parsons without any extra investment from them. In other words these Directors could effectively block the sale of Sherryfitzgerald's stake unless some of their own terms are met.
I think that is what you are trying to get at.
In my opinion I would doubt that the value of the business is 60 million. The value of the business is somewhat subjective and linked to it's reputation. Although it could generate high revenue, it probably has a high debt burden remaining from its expansion right at the peak of the market and I doubt it owns significant fixed assets.
@Jonnie B Good
What is your take on "affordability"?
Should everyone be able to have what they want?
If one wanted a Rolls Royce should it be produced and priced so that they could buy it no-matter what?.
The foreclosure by the Bank on Sherry Fitzgerlads prized asset works out to be a great vehicle for Peter Rollings to increase is equity stake without having to invest further from his own pocket. One step closer to that Management buy out and the dream of a majority stake!
Good luck to M&P
PR is a switched on operator, who engineers success.
If the Foxtons sale marked the peak of the big bull market perhaps the M&P will later be seen as marking the end of the great 'false market' of 2009-2011. A 'false market' is basically what exists now. 90% of people are clinging on on Tracker mortgages and there are almost no transactions happening. The BoE eventually will HAVE to raise rates and as soon as that happens many of the clingers on will have no option but to sell. Then we get the proper correction that all the affordability stats point to.