OPINION: Did Foxtons buy Douglas & Gordon ‘for a song’?

The Negotiator casts a critical eye over this year's most high-profile and transparent estate agency acquisition deal.


The Neg has spoken to several industry figures about the latest results from Foxtons which reveal how much turnover the acquisition of rival Douglas & Gordon has added to its revenues so far.

As we reported in March this year, 19-branch Douglas & Gordon was bought for £14.25 million by Foxtons, which has now revealed that it has already received £12 million in additional revenue during the eight months since the deal was signed.

Lettings firms usually sell for between 1.5 and 2 -times annual turnover rather than on the profit-multiplier which is used for most other kinds of business.

Foxtons employed this method of valuation for its acquisitions prior to the D&G deal – Aston Rowe and London Stone Properties, which were sold for 1.99 and 1.5 times turnover respectively.

But using publicly-available information, we calculated that Foxtons’ purchase of D&G appears to come in at a surprisingly low 1.3 x letting turnover with nothing at all paid for the sales business.

Many millions

Depending on how D&G performs for the next four months or so, this suggests the company was sold for many millions less than its apparent value.

D&G is unusual because the company’s sale price was revealed but also because most lettings companies are sold for integration into a competitors business rather than as a going concern.

Foxtons has taken on all D&G’s branch leases and staff so there will be some lease termination and redundancy costs to take account of, but even so, the purchase would seem to be an extremely shrewd buy for Foxtons.

However, the Talbot Willcox family who used to own D&G may have considered £14.25 million a princely sum compared to what they might have got if the agency’s profits were used solely as a guide to value – it only made £268,000 profits on a £16 million turnover last year.

One Comment

  1. My thoughts and I get quite involved in A & M these days is that both parties got what they required. Totally embrace the point that 1.85 x letting turnover for ‘proper inventory’ is realistic, but for Douglas & Gordon that wafer thin profit margin would have been a good sign to get out. For Foxtons if they have massive efficiencies of scale due to technology, and can plug and play the vast inventory into their empire, then a huge winner for them.

    Increasingly at Proptech-PR we see company A has huge revenue, great reputation, but hugely innefficient tech and processes, and company B has tech and processes in place, so can leverage the situation immediately. Whereas company A does not have the capital and or knowledge or time to internally change. It is the Dinosaur Vs Digital age, there will be much more of this.

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