Moody’s revises DTZ outlook to “negative” after Cushman deal

Ratings agency cites increased financial leverage, integration risks
By Rey Mashayekhi | May 13, 2015 05:25PM

Ratings agency Moody’s has revised its outlook on DTZ to negative from stable in wake of the commercial real estate firm’s acquisition of Cushman & Wakefield.

While Moody’s affirmed DTZ’s ratings, the revised outlook “reflects the potential for increased financial leverage, as well as integration risks associated” with the Chicago firm’s $2 billion merger with New York-based Cushman & Wakefield, it said Tuesday.

Moody’s also pointed to DTZ’s $557 million acquisition of brokerage Cassidy Turley earlier this year, which it said the company “is still digesting.”

“DTZ will be challenged with meshing the two firms’ corporate cultures and retention of employees who are key to driving its services-based businesses forward,” Moody’s said, adding that it “will be closely monitoring DTZ’s plans for accessing the external capital needed to finance this merger.”

The ratings agency noted that the merger “does offer credit positive aspects as well,” with DTZ establishing a position as “one of the leading providers of commercial real estate services across a highly fragmented industry.” The firm will also see annualized revenues jump to more than $5 billion pro forma, compared to about $3 billion currently.

The merger will see the combined firm keep the Cushman & Wakefield name and create a commercial real estate firm rivaling the likes of CBRE and JLL in size. DTZ’s Brett White will be CEO of the company.

The Agnelli family’s Exor SpA placed Cushman & Wakefield on the market earlier this year, mere months after it acquired investment sales brokerage Massey Knakal Realty Services for $100 million.