AWARD SPOTLIGHT: Brookfield Asset Management winner of 2020 PE Deal of the Year for BGIS
Congratulations to Brookfield Asset Management for winning the 2020 PE Deal of the Year Award for BGIS. The 2020 CVCA Awards are sponsored by HarbourVest Partners Canada.
When Brookfield Asset Management‘s private equity group acquired control of its Canadian and Australian facilities management business from its joint venture partner in 2015, it was part of a broader plan to create a leading global facilities management provider.
Brookfield Johnson Controls, later rebranded as BGIS, was a joint venture between Brookfield and Johnson Controls of Milwaukee. Johnson Controls was under pressure from an activist investor to sell its real estate division to focus more on its technology services in the automotive and power sectors.
The CAD$500M deal led to the consolidation of Brookfield’s businesses in Canada, Australia and New Zealand, while also enabling Brookfield to grow the businesses into the United States and Europe.
“Part of our approach was to grow and strengthen the business by entering new geographies, broadening the suite of offerings with existing clients and bidding to get new customers,” says Dave Nowak, a managing partner in Brookfield’s Private Equity Group in Toronto.
Four years later, after doubling its EBITDA and geographic footprint, Brookfield sold BGIS to CCMP Capital Advisors, LP for more than CAD$1.3B. New York-based CCMP is a private equity firm focused on making buyout and growth equity investments in North America and Europe in three primary industries: consumer, industrial and healthcare.
At the time of the sale, Toronto-based BGIS had more than 7,000 employees worldwide with global offices in markets including the U.S., Australia, New Zealand, Singapore, and Hong Kong.
“Under Brookfield’s ownership, BGIS has established itself as a leading global facilities management provider, managing more than 320 million square feet of real estate representing more than 30,000 locations across North America, Asia Pacific and Europe,” the company stated in the announcement on March 11, 2019. The deal closed on May 31, 2019. With the sale, Brookfield earned a more than 4x multiple on invested capital.
The transaction was awarded the CVCA’s Private Equity Deal of the Year.
Nowak said BGIS became a successful, leading global business because of its deep expertise in real estate management and services, as well as its strong management team.
“The combination of a high-quality business in an industry we understand well with an excellent management team set it up as a strong investment out of the gate,” Nowak says. “We were able to grow EBITDA while preserving margins and enhancing the focus on the technical service side of things.”
Brookfield expanded the size, scale, and geographic footprint of BGIS through both organic growth and a handful of acquisitions.
The business’ significant U.S. expansion started with the purchase in 2016 of McKinstry FMS, a data centre facility management service business in the U.S. with more than 350 engineers, technicians, planners and program managers. The deal helped BGIS become one of the largest data centre and critical environment facility management companies in North America.
“That really became the beachhead of allowing us to expand into the U.S.,” Nowak says. “The business started to evolve from being primarily a provider of facilities management to banks, governments and gas stations, to offering a full suite of technical solutions to a diverse client base .”
Nowak describes private equity like a triathlon with three legs: the initial investment, the portfolio management to create value and finally deciding when to sell.
“Timing the sale is often the most underappreciated part of the business,” he says, citing the considerations in either holding on to an investment for too long, or selling it too soon.
Nowak says there were offers to buy BGIS over the years, in particular from some of the big-name real estate brokerage firms looking to diversify their holdings into facilities management for the steady cash generation.
The decision to sell came after BGIS doubled EBITDA sooner than targeted, Nowak says, adding that there were several interested parties before Brookfield struck its deal with CCMP.