TPG Played Cushman Deal Perfectly And Made A Huge Profit

Last week an investor group led by TPG floated Cushman & Wakefield in a deal that valued the equity in the newly listed company at around $3.1B.

It played its hand perfectly and made a huge profit, which at this point stands at a theoretical $794M-$926M.

TPG started off its foray into the real estate services world with a distressed deal. It paid Australian conglomerate UGL around $1.1B for DTZ, the European and Asian property services firm, in June 2014. UGL had itself picked up DTZ in a distressed deal, when in 2011 the U.K.-listed firm hit a cash crisis and needed to find an emergency buyer. It was eventually sold through an insolvency process.

But UGL could not integrate DTZ into its wider business and saw its share price drop after shareholders questioned its strategy, leading to a sale of DTZ.

TPG immediately began the process of bulking up DTZ, and agreed to pay $360M for Cassidy Turley in September 2014.

Then in September 2015 it made its biggest bet yet, paying $1.9B for Cushman & Wakefield. In the Agnelli family’s Exor investment vehicle TPG found a willing seller — rumours of a sale of Cushman had swirled for years. But the price paid was far from cheap, with 2015 near the global peak for investment volumes.

So TPG paid nearly $3.4B for the businesses that make up Cushman today. It used debt to make these acquisitions, and Cushman had around $2.8B at the time of the IPO, according to the IPO prospectus. That puts the size of its equity investment at about $600M, for a business where the equity is valued at $3.1B.

TPG and its partners sold 45M shares at around $11 a share, equating to about 34% of Cushman, retaining a 66% stake. That puts TPG's profit at around $6-$7 a share. For the 45 million shares already sold that is a profit of $270M to $315M. If that were extrapolated across the entirety of the business that equates to a profit of $810M to $926M.

As the price of the shares rises or falls and TPG sells more of its shares in Cushman, that profit figure will change. But it is safe to say that TPG has done pretty well out of its foray into real estate services.

CORRECTION, August 10, 5:40 A.M. ET: A previous version of this story misstated the size of the profit made as being $2.5B.