London-based private equity firm Permira is buying a majority stake in the Hamburg-headquartered international property brokerage platform Engel & Völkers.
The deal will see the Völkers family and part of the management retaining just under 40% percent of the shares, the companies said in a joint statement this week. Company co-founder Christian Völkers said he wanted to "implement his vision for the digitalisation of the brand" with the resources of Permira, and will remain with the business as chairman of the advisory board.
No official price was given for the deal, which is expected to close by the end of the year. However, close observers say the company' valuation is just under €700 million euros, so Permira's stake probably cost them close to €400m.
The company was founded in 1977 by Dirk Engel, who was joined four years later by his close friend Christian Völkers when the company was still fairly small. Engels committed suicide in 1986, after which Völkers renamed the company Engel & Völkers and set the company on its massive expansion course, based on a franchise model. The current CEO Sven Odia has been a board member since 2006 and co-boss with Völkers since 2014, with Völkers moving to the Supervisory Board in 2020, leaving Odia in operative charge of the business.
Today the company has more than 800 branch offices under the Engel & Völkers name in 20 countries, employing over 11,500. The company targets the upper end of the market, specialising in wealthy clients. Brokerage turnover this year is expected to top €1bn.
Permira manages about €44bn for its investors across 17 different funds. Its approach is to take majority stakes in companies and then exert influence over the business strategy with a view to a later exit at a decent profit, where possible. Engel & Völkers can tap into this strategy by partnering up with Permira to really digitise its business and to boost growth across its platform. Engel & Völkers' traditional strengths internationally have been in classic holiday destinations such as Spain, where it has built up a sizeable presence, but the partnership with Permira would allow it to expand into the UK.
The Permira investment will give the company access to Engel & Völkers' wealthy and influential clientele, while at the same time through more digitisation upgrading recruitment and operating conditions for its sales agents, boosting internal marketing processes, and acquiring more mandates, said both companies. Part of Engel & Völkers' difficulties, however, is that while the property markets have been booming driven by low financing costs, its wealthy clientele often don't need a loan, and therefore don't avail of Engel & Völkers' additionally lucrative financing solutions.
This has led in the past to a number of Engel & Völkers licensees involving their clients in investment scandals, notably in Canada and Dubai, with Engel & Völkers still involved in ongoing attempts to distance themselves and their name from what turned out to be hundred-million disasters for investors. The State Court of Hamburg is sorting out several of these cases at the moment.
REFIRE understands that Permira has specifically drawn attention to these problems in its contractual offer, and has stressed the need for Engel & Völkers to concentrate on its core business of property brokerage. Potential franchisees who simultaneously promote project developments or property funds will no longer be welcome as partners. Classical brokers, however, will be encouraged in their traditional business and more directly integrated into the Engel & Völkers platform through the enhanced digital network.
The Permira move has similarities with the Frankfurt-based franchise real estate brokerage von Poll. Three years ago German private equity group Deutsche Beteiligungs AG (DBAG) likewise invested in the upmarket brokerage group von Poll - paying €11.7 million for a 30.1% stake - to help with digitising the broker's platform, and boost its international expansion plans.
In Germany, Permira bought the Göppingen-based remote computer maintenance company Teamviewer in 2014 before floating it on the stock exchange in 2019 and exiting much of its position, at a healthy profit.
