The mergers of large consulting companies has resulted in the birth of new players

Consolidation is a natural process that happens after a market has slumped. After 2008 the real estate sector survived a massive heart attack. The patient is still with us, but his recovery is continuing to this day. In 2011, there were several highly significant mergers and acquisitions. King Sturge - a company with a more than century-old tradition - disappeared, acquired and absorbed by Jones Lang LaSalle. DTZ was fighting for survival and considering a possible merger with BNP Paribas. Finally the company was bought the Australian UGL Group and is now officially called ?DTZ, a UGL company'. CB Richard Ellis acquired ING REIM Europe, ING REIM Asia and Clarion Real Estate Securities. It was argued that this consolidation process would continue until the consultancy sector was concentrated in the hands of three or four players. But instead staff movements have actually led to newer players entering the market. And they seem to be the biggest winners.

Talent swamps the market
Mark Twomey, managing partner of Tara HR Consulting, believes that the CEE region has not benefited from this consolidation as much as it could. "The most surprising thing was that Jones Lang LaSalle did not make more of the new resources they acquired. Some very good King Sturge people joined JLL, but for one reason or another they couldn't fit into the new structure." Nonetheless, other agencies did benefit from senior executives coming onto the market. "Savills did extremely well from the fallout in getting people like Mark Freeman, the head of valuation and consultancy, and Tomasz Buras, the head of the office agency." Alexander Morari, the managing partner of PropertyTalents (another specialist real estate recruitment agency), agrees. "If anyone profited from the acquisition of King Sturge by Jones Lang LaSalle, it was Savills," he says. Before, Savills was quiet in its business development. It showed a lot of patience to snap up what Mr Morari describes as a "juicy unit", by which he means the office agency department of Tomasz Buras. "Jones Lang LaSalle made an effort to make it look alright and integrate staff, but there was one condition: Its people were to stay on top of particular business lines," says Tomasz Buras, head of the office agency at Savills. There was no easy way to compromise as "there was no up or sideways. It is difficult to combine strong personalities and any merger or acquisition can fail over this factor," he says. In the end he approached Savills and transferred with three members of his six-man office team. "In a consultancy business, clients follow good people, because of their relationships and experience - not the brand itself. Thanks to the trust of our clients and the entrepreneurial spirit of me and my team, we have very quickly been able to build the business back to a similar size as we had at King Sturge." Although at the time of the acquisition, King Sturge was big in the UK and in parts of the CEE region, it was dwarfed by Jones Lang LaSalle. "JLL wanted a foothold in the UK, but there was no benefit to Poland or any other CEE market apart from eliminating the competition," claims Mark Twomey. In his opinion, JLL did well in the Balkans, where it was not previously present, and that King Sturge was sold at just the right time. A similar situation applies in Slovakia.

Without staffing confusion
However, not all of the mergers have entailed a migration of personnel. "Three weeks later there was a stock market wobble which wiped almost 50 pct off the share value of DTZ - that's why the DTZ Paribas deal fell through," explains Mr Twomey. After BNP Paribas backed out of buying DTZ, it had to work hard in order to facilitate its immediate sale to Australian firm UGL. Unlike the takeover of King Sturge, this deal has had little effect on the real estate recruitment market, largely because UGL was never previously present in the same markets as DTZ. "According to some of my contacts at DTZ, nothing really new has happened since the takeover," says Mark Twomey. Alexander Morari sees it differently: The negotiations regarding the merger "blocked both companies from concentrating on their businesses." When the deal fell through and DTZ was sold off to UGL "it allowed DTZ to exhale with ease and allowed BNP Paribas to make key staffing decisions and start developing its own team." Alexander Morari now believes that BNP Paribas is to increase in importance on the market, which is partially due to the almost unlimited financial backing of its banking parent.

Gazing into the crystal ball
Indeed, Alexander Morari foresees that the real estate consultancy market might one day soon appear very, very different. He claims that Savills strengthening position on the market is not only due to scooping up former employees from King Sturge. Renata Kusznierska has joined the company as head of retail from Carrefour Property Poland, an appointment that Mr Morari describes as a "lucky strike", stating that "Savills has suddenly become one of the big five in the making." Moreover, Alexander Morari also speaks of the possibility that the group of major players may even be significantly extended. BNP Paribas, Colliers, Jones Lang LaSalle, Savills, CBRE, DTZ and Cushman & Wakefield could be joined by... Sharman Church! But who are Sharman Church? This is a start-up by Jason Sharman (formerly the managing director King Sturge) and Ian Church (a former partner at EC Harris). Jason Sharman explains that the idea behind the firm is to combine the best of an international practice with an entrepreneurial niche firm. He explains that for clients having one of the managing partners deal with their account personally makes them feel like a big fish in a small pond. But when it comes to size he believes: "One wants to aspire to be the best. The biggest isn't always the best." Still, Alexander Morari predicts that "it will take six months for people to get used to there being a new player. Then they will start elbowing around to get business." Unsurprisingly, this is not the only niche company to come onto the market after the acquisition of King Sturge. Aspenn has now been operating on the market for just over ten months and has already attracted staff such as Jacek Malicki, who previously worked for DTZ.
Last year we were all wondering how the mergers and acquisitions would affect the market in Central and Eastern Europe. Opinions from that period still remain pertinent. In that year, the director of a large agency told us: "In a way big mergers weaken the potential of the combined companies for a while. People are not focusing on acquiring or servicing clients. Instead they are starting to think about which boss to please in order to improve their chances of keeping their jobs." We can now see that he had got this spot on. The question now is - what will happen next? When the situation for large agencies returns to normal they will once again be able to flex their muscles. And then it will be a real test for the ambitious newer players.

Alex Hayes