Foxtons buys Ludlow Thompson; Dexters is (reported to be) buying Kinleigh Folkard Hayward (KFH); and Leaders Romans Group (LRG) is (reported to be) buying Stirling Ackroyd.
In an average week, any of these would have been huge news. That they are all said to have happened over the last seven days is seismic – but what does it mean for the health of the market in general? And, assuming they are announced in the coming days, will these be seen as the high watermark in M&A activity in the sector – or are there more likely to be coming down the track?
I think that the interplay between the timings of these three is important for assessing their individual, and overall, merit. Let’s assume that, in order to get the best outcome for Ludlow Thompson, Stirling Ackroyd and KFH, each of their intermediaries would have been out scouting potential acquirers for months (if not years – I haven’t seen the Russell Quirk “told you so” coverage yet, but I am certain that it’s on its way …).
Every single one of them would have had to have reached out to Foxtons, Dexters and LRG – plus, presumably, some others that have been acquisitive over time, including Lomond and Connells.
That would mean that each knew the others were on the slab. The least valuable – at £10m, Ludlow Thompson is still a sizeable outfit but that price is perhaps on the light side for such a solid London lettings’ brand – would know they had to move fast in order to secure the buyer’s signature. Guy Gittins, canny CEO of Foxtons, will undoubtedly have used the potential availability of KFH and Stirling Ackroyd as leverage to grind out as quick a deal as possible, at an advantageous price.
Once that domino fell, a fight between the two VC-backed behemoths Leaders Romans Group (LRG) and Dexters for Stirling Ackroyd would have accelerated. This acceleration is, I think, probably the reason that news has leaked of the deals before any of the parties were ready for a formal announcement. The faster people have to move, the more mistakes they make along the way.
Of the three deals, the Stirling Ackroyd one feels the most opportunistic. Whilst both of the other potential sellers, KFH and Ludlow Thompson, have founder-owners likely wanting to cash out as the market headed towards another period of uncertainty, Stirling Ackroyd was acquired by Nick Dunning Associates – itself backed by VC Alchemy Partners – in 2017 and had recently undergone a complete rebrand of its old Townends and Regents branches.
Perhaps Alchemy always had a 6-year window in mind – or perhaps it had been offered Ludlow Thompson too. It doesn’t take a rapacious VC to realise that it could leverage any interest that the losers in the battle for Ludlow Thompson had, by being acquired itself.
I’d assume that they have secured a decent premium for the business, based on a “we don’t have to sell, make us an offer” to the suitors. Foxtons’ appetite for risking two deals (and integrations) would be low but their presence would likely propel LRG to make a high offer – based on Stirling’s lettings property numbers and turnover, I’d imagine it’s somewhere around £25m.
As far as the KFH deal is concerned, few would be able to afford it – perhaps Lomond and Connells alongside Dexters – but owner Lee Watts is 70 next year and, after a great couple of years, is likely to want to leave on a high. Dexters are notoriously ruthless negotiators so I’d expect an £80m-ish price – but with some super-tight post-deal clauses requiring commitments from Directors (it’s interesting to note that one KFH Director chose to resign suddenly 3 weeks ago).
Is this likely to be the last big week in UK estate agency consolidation for a while? I think, in fact, that there are more to come. Some heavily-fatted, privately-owned businesses are out there whose owners know they’ve peaked and who are likely to want to cash out. On the other hand, there are also some whose businesses are in poor shape and who have only survived due to pandemic tax breaks and bumper takings in 2021/22. We’re not in ‘fire sale’ territory just yet, which is why there will be more activity, I think, in 2024.
From the buyers’ perspectives, Lomond have continued to spend their backers’ investments wisely and Connells will shortly get over the indigestion from swallowing Countrywide. That retooled and incredibly powerful monster will be back on the prowl for bargains next year too.
So watch out for some more consolidation acceleration across the country in 2024, after what is sizing-up to be another seismic week for London’s property market.
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