S-1/A 1 d522375ds1a.htm AMENDMENT NO.2 TO FORM S-1 Amendment No.2 to Form S-1
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As filed with the Securities and Exchange Commission on July 23, 2018

Registration No. 333-225742

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CUSHMAN & WAKEFIELD plc

(Exact name of Registrant as specified in its charter)

 

England and Wales

  6500   98-1193584

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

  (I.R.S. Employer Identification No.)

 

 

125 Old Broad Street

London, United Kingdom, EC2N 1AR

Telephone: +44 20 3296 3000

(Address including zip code, telephone number, including area code, of Registrant’s Principal Executive Offices)

 

 

Brett Soloway

Cushman & Wakefield

225 West Wacker Drive

Chicago, Illinois 60606

Telephone: (312) 470-1800

(Name, address including zip code, telephone number, including area code, of agent for service)

 

 

Copies To:

 

Jeffrey D. Karpf

Helena K. Grannis

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, New York 10006

(212) 225-2000

 

Brett Soloway

Cushman & Wakefield

225 West Wacker Drive

Chicago, Illinois 60606

(312) 470-1800

 

Patrick O’Brien

Thomas J. Fraser

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, Massachusetts 02199

(617) 951-7000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date hereof.

 

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer  ☐   Accelerated filer  ☐   Non-accelerated filer  ☒   Smaller reporting company   ☐   Emerging growth company  ☐
    (Do not check if a smaller reporting company)    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount to be

Registered(1)(2)

 

Proposed

Maximum

Offering Price

Per Share(3)

  Proposed Maximum
Aggregate
Offering Price(1)
  Amount of
Registration
Fee(2)(4)

Ordinary shares, $0.10 nominal value per share

 

51,750,000

 

$18.00

  $931,500,000   $115,971.75

 

 

(1) Includes 6,750,000 shares that the underwriters have an option to purchase from the registrant.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as amended.
(3) Anticipated to be between $16.00 and $18.00.
(4) Includes $12,450 the registrant previously paid in connection with the initial filing of this registration statement.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS (Subject to Completion)

Issued July 23, 2018

45,000,000 Shares

 

LOGO

Ordinary Shares

 

 

Cushman & Wakefield plc is offering 45,000,000 of its ordinary shares. This is our initial public offering, and no public market currently exists for our ordinary shares. We anticipate that the initial public offering price will be between $16.00 and $18.00 per share.

We have applied to list our ordinary shares on the New York Stock Exchange (NYSE) under the symbol “CWK.”

 

 

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 22.

 

 

 

      

Price to

Public

      

Underwriting

Discounts

and

Commissions(1)

      

Proceeds to

Cushman & Wakefield

(Before

Expenses)

 

Per Share

       $                              $                              $                      

Total

       $                              $                              $                      

 

(1) See “Underwriters (Conflicts of Interest)” beginning on page 180 of this prospectus for additional information regarding underwriting compensation.

We have granted the underwriters an option to purchase up to an additional 6,750,000 ordinary shares at the initial public offering price less the underwriting discount. The underwriters can exercise this right at any time and from time to time, in whole or in part, within 30 days after the offering.

Neither the Securities and Exchange Commission nor state regulators have approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ordinary shares to purchasers on or about                 , 2018.

 

 

 

MORGAN STANLEY   J.P. MORGAN     GOLDMAN SACHS & CO. LLC       UBS INVESTMENT BANK

 

BARCLAYS
          BofA MERRILL LYNCH
                     CITIGROUP
                 CREDIT SUISSE
                   WILLIAM BLAIR

 

TPG CAPITAL BD, LLC           HSBC               CREDIT AGRICOLE CIB   JMP SECURITIES

CHINA RENAISSANCE

      FIFTH THIRD SECURITIES

 

ACADEMY SECURITIES   LOOP CAPITAL MARKETS   RAMIREZ & CO., INC.   SIEBERT CISNEROS SHANK & CO., L.L.C.   THE WILLIAMS CAPITAL GROUP, L.P.

                    , 2018


Table of Contents

TABLE OF CONTENTS

 

Market and Industry Data and Forecasts

     ii  

Prospectus Summary

     1  

Risk Factors

     22  

Cautionary Note Regarding Forward-Looking Statements

     47  

Use of Proceeds

     50  

Dividend Policy

     51  

Capitalization

     52  

Dilution

     53  

Selected Historical Consolidated Financial Data

     55  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     58  

Business

     103  

Management and Board of Directors

     113  

Compensation Discussion and Analysis

     119  

Principal Shareholders

     139  

Certain Relationships and Related Party Transactions

     142  

Description of Share Capital

     146  

Description of Certain Indebtedness

     163  

Shares Eligible for Future Sale

     168  

Tax Considerations

     172  

Underwriters (Conflicts of Interest)

     180  

Legal Matters

     189  

Experts

     190  

Enforcement of Judgments

     191  

Where You Can Find More Information

     192  

Index to Financial Statements

     F-1  

 

 

We are responsible for the information contained in this prospectus and in any related free-writing prospectus we may prepare or authorize to be delivered to you. We have not authorized anyone to give you any other information, and we take no responsibility for any other information that others may give you. We are not, and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of our ordinary shares.

Our Internet website address is www.cushmanwakefield.com. Information on, or accessible through, our website is not part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.


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MARKET AND INDUSTRY DATA AND FORECASTS

This prospectus includes industry data and forecasts that we obtained from industry publications and surveys, public filings and internal company sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of the included information. We have not independently verified such third-party information nor have we ascertained the underlying economic assumptions relied upon in those sources. While we are not aware of any misstatements regarding our market, industry or similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.

 

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PROSPECTUS SUMMARY

This summary may not contain all of the information that may be important to you. You should read this summary together with the entire prospectus, including the information presented under the heading “Risk Factors” and the more detailed information in the financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision.

In this prospectus, unless we indicate otherwise or the context requires:

 

    “Cushman & Wakefield,” “the Company,” “we,” “ours” and “us” refer to Cushman & Wakefield plc and its consolidated subsidiaries.
    “Fee revenue,” “Adjusted EBITDA” and “Adjusted EBITDA margin” are non-GAAP measures and are defined under “Summary Historical Consolidated Financial and Other Data.”

Our Business

We are a top three global commercial real estate services firm with an iconic brand and approximately 48,000 employees led by an experienced executive team. We operate from approximately 400 offices in 70 countries, managing approximately 3.5 billion square feet of commercial real estate space on behalf of institutional, corporate and private clients. We serve the world’s real estate owners and occupiers, delivering a broad suite of services through our integrated and scalable platform. Our business is focused on meeting the increasing demands of our clients across multiple service lines including property, facilities and project management, leasing, capital markets, valuation and other services. In 2017 and 2016, we generated revenues of $6.9 billion and $6.2 billion, and fee revenues of $5.3 billion and $4.8 billion. For the three months ended March 31, 2018, we generated revenue of $1.8 billion and fee revenue of $1.2 billion.

Since 2014, we have built our company organically and through the combination of DTZ, Cassidy Turley and Cushman & Wakefield, giving us the scale and worldwide footprint to effectively serve our clients’ multinational businesses. The result is a global real estate services firm with the iconic Cushman & Wakefield brand, steeped in over 100 years of leadership. We were recently named #2 in our industry’s top brand study, the Lipsey Company’s Top 25 Commercial Real Estate Brands.

The past four years have been a period of rapid growth and transformation for our company, and our experienced management team has demonstrated its expertise at integrating companies, driving operating efficiencies, realizing cost savings, attracting and retaining talent and improving financial performance. Since our inception in 2014, we have driven significant growth in fee revenue, Adjusted EBITDA and Adjusted EBITDA margin and significantly exceeded our initial estimates of the integration benefits from the combination of the three companies. We recorded a net loss of $474 million in 2015 and a net loss of $221 million in 2017 and we grew Adjusted EBITDA from $336 million to $529 million over the same period. For the three months ended March 31, 2018, we recorded a net loss of $92.0 million and Adjusted EBITDA of $74.8 million.

Today, Cushman & Wakefield is one of the top three real estate services providers as measured by revenue and workforce. We have made significant investments in technology and workflow to improve our productivity, enable our scalable platform and drive better outcomes for our clients. We are well positioned to continue our growth through: (i) meeting the growing outsourcing and service needs of our target customer base, (ii) leveraging our strong competitive position to increase our market share and (iii) participating in further consolidation of our industry. Our proven track record of strong operational and financial performance leaves us well-positioned to capitalize on the attractive and growing commercial real estate services industry.

Industry Overview and Market Trends

We operate in an industry where the increasing complexity of our clients’ real estate operations drives strong demand for high quality services providers. We are one of the top commercial real estate services firms,



 

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and beyond us and our two direct global competitors, the sector is fragmented among regional, local and boutique providers. Industry sources estimate that the five largest global firms combined account for less than 20% of the worldwide commercial real estate services industry by revenue. According to industry research, the global commercial real estate industry is expected to grow at approximately 5% per year to more than $4 trillion in 2022, outpacing expected global gross domestic product (“GDP”) growth. The market for global integrated facilities management is expected to grow at approximately 6% per year from 2016 to 2025. Top global services providers, including Cushman & Wakefield, are positioned to grow fee revenue faster than GDP as the industry continues to consolidate and evolve, secular outsourcing trends continue and top firms increase their share of the market.

During the next few years, key drivers of revenue growth for the largest commercial real estate services providers will include:

Continued Growth in Occupier Demand for Real Estate Services. Occupiers are focusing on their core competencies and choosing to outsource commercial real estate services. Multiple market trends like globalization and changes in workplace strategy are driving occupiers to seek third-party real estate services providers as an effective means to reduce costs, improve their operating efficiency and maximize productivity. Large corporations generally only outsource to global firms with fully developed platforms that can provide all the commercial real estate services needed. Today, only three firms, including Cushman & Wakefield, meet those requirements.

Institutional Investors Owning a Greater Proportion of Global Real Estate. Institutional owners, such as real estate investment trusts (known as REITs), pension funds, sovereign wealth funds and other financial entities, are acquiring more real estate assets and financing them in the capital markets. Industry sources estimate that there was $249 billion of global private equity institutional capital raised and available for investing in commercial real estate as of December 31, 2017, which represents an 83% increase over the last three years.

This increase in institutional ownership creates more demand for services providers in three ways:

 

    Increased demand for property management services – Institutional owners self-perform property management services at a lower rate than private owners, outsourcing more to services providers.
    Increased demand for transaction services – Institutional owners transact real estate at a higher rate than private owners.
    Increased demand for advisory services – Because of a higher transaction rate, there is an opportunity for services providers to grow the number of ongoing advisory engagements.

Owners and Occupiers Continue to Consolidate Their Real Estate Services Providers. Owners and occupiers are consolidating their services provider relationships on a regional, national and global basis to obtain more consistent execution across markets, to achieve economies of scale and enhanced purchasing power and to benefit from streamlined management oversight of “single point of contact” service delivery.

Global Services Providers Create Value in a Fragmented Industry. The global services providers with larger operating platforms can take advantage of economies of scale. Those few firms with scalable operating platforms are best positioned to drive profitability as consolidators in the highly fragmented commercial real estate services industry. Cushman & Wakefield’s platform is difficult to replicate with our approximately 48,000 employees operating from approximately 400 offices in 70 countries leveraging our iconic brand, significant scale and a comprehensive technology strategy.



 

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Increasing Business Complexity Creates Opportunities for Technological Innovation. Organizations have become increasingly complex, and are relying more heavily on technology and data to manage their operations. Large global commercial real estate services providers with leading technological capabilities are best positioned to capitalize on this technological trend by better serving their clients’ complex real estate services needs and gaining market share from smaller operators. In addition, integrated technology platforms can lead to margin improvements for the larger global providers with scale.

Our Principal Services and Regions of Operation

We have organized our business, and report our operating results, through three geographically organized segments: the Americas, Asia Pacific and Europe, Middle East and Africa, or EMEA, representing 67%, 18% and 15% of our 2017 fee revenue, respectively. Within those segments, we organize our services into the following service lines: property, facilities and project management; leasing; capital markets; and valuation and other, representing 47%, 31%, 14% and 8% of our 2017 fee revenue, respectively.

Our Geographical Segments

We have a global presence – approximately 400 offices in 70 countries across six continents – providing a broad base of services across geographies. We hold a leading position in all of our key markets, globally. This global footprint, complemented with a full suite of service offerings, positions us as one of a small number of providers able to respond to complex global mandates from large multinational occupiers and owners.

 

LOGO



 

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Our Service Lines

Property, Facilities and Project Management. Our largest service line includes property management, facilities management, facilities services and project and development services. Revenues in this service line are recurring in nature, many through multi-year contracts with high switching costs.

For occupiers, services we offer include integrated facilities management, project and development services, portfolio administration, transaction management and strategic consulting. These services are offered individually, or through our global occupier services offering, which provides a comprehensive range of bundled services resulting in consistent quality service and cost savings.

For owners, we offer a variety of property management services, which include client accounting, engineering and operations, lease compliance administration, project and development services and sustainability services.

In addition, we offer self-performed facilities services globally to both owners and occupiers, which include janitorial, maintenance, critical environment management, landscaping and office services.

Fees in this service line are primarily earned on a fixed basis or as a margin applied to the underlying costs. As such, this service line has a large component of revenue that consists of us contracting with third-party providers (engineers, landscapers, etc.) and then passing these expenses on to our clients.

Leasing. Our second largest service line, leasing consists of two primary sub-services: owner representation and tenant representation. In owner representation leasing, we typically contract with a building owner on a multi-year agreement to lease their available space. In tenant representation leasing, we are typically engaged by a tenant to identify and negotiate a lease for them in the form of a renewal, expansion or relocation. We have a high degree of visibility in leasing services fees due to contractual renewal dates, leading to renewal, expansion or new lease revenue. In addition, leasing fees are cycle resilient with tenants needing to renew or lease space to operate in all economic conditions.

Leasing fees are typically earned after a lease is signed and are calculated as a percentage of the total value of payments over the life of the lease.

Capital Markets. We represent both buyers and sellers in real estate purchase and sales transactions and also arrange financing supporting purchases. Our services include investment sales and equity, debt and structured financing. Fees generated are tied to transaction volume and velocity in the commercial real estate market.

Our capital markets fees are transactional in nature and generally earned at the close of a transaction.

Valuation and other. We provide valuations and advice on real estate debt and equity decisions to clients through the following services: appraisal management, investment management, valuation advisory, portfolio advisory, diligence advisory, dispute analysis and litigation support, financial reporting and property and /or portfolio valuation. Fees are earned on both a contractual and transactional basis.

Our Competitive Strengths

We possess several competitive strengths that position us to capitalize on the growth and globalization trends in the commercial real estate services industry. Our strengths include the following:

Global Size and Scale. Our multinational clients partner with real estate services providers with the scale necessary to meet their needs across multiple geographies and service lines. Often, this scale is a pre-



 

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requisite to compete for complex global service mandates, which drives the growing need to enable people and technology platforms. We are one of three global real estate services providers able to deliver such services on a global basis. Our approximately 48,000 employees offer our clients services through our network of approximately 400 offices across 70 countries. This scale provides operational leverage, translating revenue growth into increased profitability.

Breadth of Our Service Offerings. We offer our clients a fully integrated commercial real estate services experience across property, facilities and project management, leasing, capital markets, and valuation and other services. These services can be bundled into regional, national and global contracts and/or delivered locally for individual assignments to meet the needs of a wide range of client types. Regardless of a client’s assignment, we view each interaction with our clients as an opportunity to deliver an exceptional experience by delivering our full platform of services, while deepening and strengthening our relationships.

Comprehensive Technology Strategy. Our technology strategy focuses on (i) delivering high-value client outcomes, (ii) increasing employee productivity and connectedness and (iii) driving business change through innovation. We have invested significantly in our technology platform over the last several years. This has improved service delivery and client outcomes. We have deployed enterprise-wide financial, human capital and client relationship management systems, such as Workday and Salesforce, to increase global connectivity and productivity in our operations. We focus on innovating solutions that improve the owner or occupier experience. As we continue to drive innovation for our clients, we have created strategic opportunities and partnerships with leading technology organizations, start-ups and property technology firms (like Metaprop NYC) focused on the built environment.

Our Iconic Brand. The history of our franchise and brand is one of the oldest and most respected in the industry. Our founding predecessor firm, DTZ, traces its history back to 1784 with the founding of Chessire Gibson in the U.K. Our brand, Cushman & Wakefield, was founded in 1917 in New York. Today, this pedigree, heritage and continuity of brand continues to be recognized by our clients, employees and the industry. Recently, Cushman & Wakefield was recognized in the Top 2 by a leading industry ranking of the Top 25 Commercial Real Estate Brands. In addition, according to leading industry publications, we have held the top positions in real estate sectors like U.S. industrial brokerage, U.S. retail brokerage and U.K. office brokerage, and have been consistently ranked among the International Association of Outsourcing Professionals’, or IAOP, top 100 outsourcing professional service firms. In 2018, Forbes named Cushman & Wakefield to its list of America’s Best Large Employers.

Significant Recurring Revenue Provides Durable Platform. 47% of our fee revenue in 2017 was from our property, facilities and project management service line, which is recurring and contractual in nature. An additional 39% of our fee revenue in 2017 came from highly visible services, which is revenue from our leasing and valuation and other service lines. These revenues have proven to be resilient to changing economic conditions and provide stability to our cash flows and underlying business.

Top Talent in the Industry. For years, our people have earned a strong reputation for executing some of the most iconic and complex real estate assignments in the world. Because of this legacy of excellence, our leading platform and our brand strength, we attract and retain some of the top talent in the industry. We provide our employees with training growth opportunities to support their ongoing success. In addition, we have a strong focus on management development to drive strong operational performance and continuing innovation. The investment into our talent helps to foster a strong organizational culture, leading to employee satisfaction. This was confirmed recently when a global employee survey, which was benchmarked against other top organizations, showed our employees have a strong sense of pride in Cushman & Wakefield and commitment to our firm.



 

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Industry-Leading Capabilities in Acquisitions and Integration. We have a proven track record of executing and integrating large acquisitions with the combination of DTZ, Cassidy Turley and Cushman & Wakefield. This track record is evident through the realization of synergies significantly in excess of our original estimates, which have contributed to our Adjusted EBITDA margin expanding significantly since our inception in 2014. In addition to completing our transformative combinations, we have also successfully completed 12 infill mergers and acquisitions (“M&A”) transactions across geographies and service lines, with two additional transactions expected to close in the third quarter of 2018. The geographic coverage, specialized capabilities and client relationships added through these infill acquisitions have been accretive to our existing platform as we continue to grow our business. In addition, over the past 20 years, our senior management team has completed more than 100 successful acquisitions, including almost all the transformative deals of scale in our industry over that period of time. This acquisition capability along with our scalable global platform creates opportunities for us to continue to grow value through infill M&A.

Capital-Light Business Model. We operate in a low capital intensity business resulting in relative significant free cash flow generation. We expect that capital expenditures will average between 1.0%-1.5% of fee revenue in the near to medium term. We expect to reinvest this free cash flow into our services platform as well as infill M&A to continue to drive growth.

Best-In-Class Executive Leadership and Sponsorship. Our executive management team possesses a diverse set of backgrounds across complementary expertise and disciplines. Our Executive Chairman and CEO, Brett White, has more than 32 years of commercial real estate experience successfully leading the largest companies in our sector. John Forrester, our President, was previously the CEO of DTZ where he began his career in 1988. Our CFO, Duncan Palmer, has held senior financial positions in global organizations across various industries over his career, including serving as CFO of Owens Corning and RELX Group.

Our Principal Shareholders, as defined herein, have supported our growth initiatives and have a proven track record of investing and growing industry-leading businesses like ours. TPG manages more than $84 billion of assets, as of March 31, 2018, with investment platforms across a wide range of asset classes, including private equity, growth equity, real estate, credit, public equity and impact investing. PAG Asia Capital is the private equity arm of PAG, one of the largest Asia-focused alternative investment managers with over $20 billion in capital under management and 350 employees globally, as of December 31, 2017. Ontario Teachers’ Pension Plan Board (“OTPP”) is the largest single-profession pension plan in Canada with CAD$189.5 billion of assets under management, as of December 31, 2017. This group of Principal Shareholders brings with them years of institutional investing and stewardship with deep knowledge and experience sponsoring public companies.

Our Growth Strategy

We have built an integrated, global services platform that delivers the best outcomes for clients locally, regionally and globally. Our primary business objective is growing revenue and profitability by leveraging this platform to provide our clients with excellent service. We expect to utilize the following strategies to achieve these business objectives:

Recruit, Hire and Retain Top Talent. We attract and retain high quality employees. These employees produce superior client results and position us to win additional business across our platform. Our real estate professionals come from a diverse set of backgrounds, cultures and expertise that creates a culture of collaboration and a tradition of excellence. We believe our people are the key to our business and we have instilled an atmosphere of collective success.



 

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Expand Margins Through Operational Excellence. Our management team has driven integration benefits during the period of our ownership by the Principal Shareholders which have significantly exceeded our original estimates. These have contributed to growing our Adjusted EBITDA margins significantly from our inception in 2014 through organic operational improvements, the successful realization of synergies from previous acquisitions and through developing economies of scale. We expect to continue to grow margin and view it as a primary measure of management productivity.

Leverage Breadth of Services to Provide Superior Client Outcomes. Our current scale and position creates a significant opportunity for growth by delivering more services to existing clients across multiple service lines. Following the DTZ, Cassidy Turley and Cushman & Wakefield mergers, many of our clients realized more value by bundling multiple services, giving them instant access to global scale and better solutions through multidisciplinary service teams. As we continue to add depth and scale to our growing platform, we create more opportunities to do more for our clients, leading to increased organic growth.

Continue to Deploy Capital Around Our Infill M&A Strategy. We have an ongoing pipeline of potential acquisitions to improve our offerings to clients across geographies and service lines. We are highly focused on the successful execution of our acquisition strategy and have been successful at targeting, acquiring and integrating real estate services providers to broaden our geographic and specialized service capabilities. The opportunities offered by infill acquisitions are additive to our platform as we continue to grow our business. We expect to be able to continue to find, acquire and integrate acquisitions to drive growth and improve profitability, in part by leveraging our scalable platform and technology investments. Infill opportunities occur across all geographies and service lines but over time we expect these acquisitions to increase our recurring and highly visible revenues as a percentage of our total fee revenue.

Deploy Technology to Improve Client Experience. Through the integration of DTZ, Cassidy Turley and Cushman & Wakefield, we invested heavily in technology platforms, workflow processes and systems to improve client engagement and outcomes across our service offerings. The recent timeframe of these investments has allowed us to adopt best-in-class systems that work together to benefit our clients and our business. These systems are scalable to efficiently onboard new businesses and employees without the need for significant additional capital investment in new systems. In addition, our investments in technology have helped us attract and retain key employees, enable productivity improvements that contribute to margin expansion and strongly positioned us to expand the number and types of service offerings we deliver to our key global customers. We have made significant investments to streamline and integrate these systems, which are now part of a fully integrated platform supported by an efficient back-office.

Corporate and Other Information

DTZ Jersey Holdings Limited, our parent company prior to the restructuring, is a Jersey limited company that was formed in 2014 in connection with the purchase of DTZ from UGL Limited. On July 6, 2018, the shareholders of DTZ Jersey Holdings Limited exchanged their shares in DTZ Jersey Holdings Limited for interests in newly issued shares of Cushman & Wakefield Limited (the “Share Exchange”), a private limited company incorporated in England and Wales. On July 19, 2018, Cushman & Wakefield Limited re-registered as a public limited company organized under the laws of England and Wales (the “Re-registration”) named Cushman & Wakefield plc. On July 20, 2018, the Company undertook a share consolidation of its outstanding ordinary shares (the “Share Consolidation”), which resulted in a proportional decrease in the number of ordinary shares outstanding as well as corresponding adjustments to outstanding options and restricted share units (“RSUs”).



 

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Cushman & Wakefield plc does not conduct any operations other than with respect to its direct and indirect ownership of its subsidiaries, and its business operations are conducted primarily out of its indirect operating subsidiary, DTZ Worldwide Limited. Our corporate headquarters are located at 225 West Wacker Drive, Chicago, Illinois. Our website address is www.cushmanwakefield.com. The information contained on, or accessible through, our website is not part of this prospectus.

The diagram below depicts our organizational structure immediately following the consummation of this offering and the transactions described above and assumes no exercise of the underwriters’ over allotment option.

 

 

LOGO

 

* Following the consummation of this offering, DTZ Jersey Holdings Limited is expected to be summarily wound up in accordance with the laws of Jersey.
** Following the consummation of this offering, the Principal Shareholders intend to dissolve Holdings LP in accordance with English law and thereafter hold their respective interests in the Company directly.


 

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Our History

In 2014, our Principal Shareholders started our company in its current form, with the purchase of DTZ from UGL Limited. At the end of 2014, the Principal Shareholders acquired and combined Cassidy Turley with DTZ. Finally, in 2015, we completed the last piece of our transformative growth with the acquisition of Cushman & Wakefield. The company was combined under the name Cushman & Wakefield in September 2015.

References in this prospectus to “DTZ” are to the DTZ Group legacy property services business of UGL Limited, acquired by our Principal Shareholders on November 5, 2014, references to “Cassidy Turley” are to the legacy Cassidy Turley companies, acquired by our Principal Shareholders and combined with us on December 31, 2014 and references to the “C&W Group” (or to “Cushman & Wakefield” where historical context requires) are to C&W Group, Inc., the legacy Cushman & Wakefield business, acquired by our Principal Shareholders and combined with us on September 1, 2015.

As part of this initial public offering we underwent a restructuring from our former holding company, a Jersey limited company, DTZ Jersey Holdings Limited, to a public limited company organized under the laws of England and Wales named Cushman & Wakefield plc.

Our Principal Shareholders

Approximately 70% of our outstanding ordinary shares, after giving effect to this offering, will be beneficially owned by DTZ Investment Holdings LP (“Holdings LP”), an entity controlled collectively by a consortium of private equity funds or plans sponsored by TPG, PAG Asia Capital and OTPP (which we refer to collectively as our Principal Shareholders). Following the consummation of this offering, the Principal Shareholders intend to liquidate and dissolve Holdings LP and thereafter hold their respective interests in the Company directly.

TPG

TPG Global, LLC (together with its affiliates, “TPG”) is a leading global alternative asset firm founded in 1992 with more than $84 billion of assets under management as of March 31, 2018 and offices in Austin, Beijing, Boston, Dallas, Fort Worth, Hong Kong, Houston, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, San Francisco, Seoul and Singapore. TPG’s investment platforms are across a wide range of asset classes, including private equity, growth equity, real estate, credit, public equity and impact investing. TPG aims to build dynamic products and options for its investors while also instituting discipline and operational excellence across the investment strategy and performance of its portfolio.

PAG Asia Capital

PAG Asia Capital is the private equity arm of PAG, one of the largest Asia-focused alternative investment managers with more than $20 billion in capital under management and 350 staff in 10 offices across Asia and in select global financial capitals. PAG Asia Capital is a pan-Asia buyout strategy whose current portfolio includes control and structured investments across many sectors including financial services, pharmaceuticals, automotive services, property management services and consumer retail sectors. PAG’s limited partners, or investors, include leading institutional investors such as sovereign wealth funds, state pension funds, corporate pension funds and university endowments based in North America, Asia, Europe, Middle East and Australia. In addition to extensive investment experience in private equity, PAG has a solid track record in real estate, having invested in more than 6,800 properties across Asia with total investment value in excess of $26 billion.



 

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Ontario Teachers’ Pension Plan Board

With CAD$189.5 billion in net assets as of December 31, 2017, OTPP is the largest single-profession pension plan in Canada. An independent organization, it invests the pension fund’s assets and administers the pensions of 323,000 active and retired teachers in Ontario. Private Capital is the private equity investment arm of OTPP, managing CAD$31.9 billion in invested capital as of December 31, 2017.

Recent Developments

Expected Second Quarter 2018 Results

For the three and six months ended June 30, 2018, we expect total revenue to be $1,974.3 million and $3,742.0 million, increases of $273.7 million and $580.1 million or 16% and 18% as compared to total revenue of $1,700.6 million and $3,161.9 million for the three and six months ended June 30, 2017. Fee revenue is expected to be $1,444.4 million and $2,690.4 million, increases of $126.8 million and $238.9 million or 10% and 10% on a local currency basis, as compared to Fee revenue of $1,301.7 million and $2,405.3 million for the three and six months ended June 30, 2017.

For the three months ended June 30, 2018, we expect net loss to be $32.2 million, a decrease of $15.1 million, as compared to a net loss of $47.3 million for the three months ended June 30, 2017. Adjusted EBITDA is expected to be $169.8 million, an increase of $36.3 million or 28% on a local currency basis, as compared to $130.6 million for the three months ended June 30, 2017.

For the six months ended June 30, 2018, we expect net loss to be $124.2 million, a decrease of $42.8 million, as compared to a net loss of $167.0 million for the six months ended June 30, 2017. Adjusted EBITDA is expected to be $244.6 million, an increase of $75.7 million or 51% on a local currency basis, as compared to $159.7 million for the six months ended June 30, 2017.

The estimated results for the three and six months ended June 30, 2018 are preliminary, unaudited and subject to completion, reflect management’s current views and may change as a result of management’s review of results and other factors. Such preliminary results are subject to the finalization of financial and accounting review procedures (which have yet to be performed) and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

Neither our independent registered public accounting firm nor any other independent registered public accounting firm has audited, reviewed or compiled, examined or performed any procedures with respect to the estimated results, nor have they expressed any opinion or any other form of assurance on the estimated results.

We consider Fee revenue, Fee-based operating expenses, Adjusted EBITDA, Adjusted EBITDA margin and local currency to be relevant non-GAAP measures. The Company believes that these measures provide a more complete understanding of ongoing operations, enhance comparability of current results to prior periods and may be useful for investors to analyze our financial performance. The measures eliminate the impact of certain items that may obscure trends in the underlying performance of our business and are defined in the section “Use of Non-GAAP Financial Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Further, we caution you that the estimates of total revenue, Fee revenue, total costs and expenses, Fee-based operating expenses, operating loss, net loss and Adjusted EBITDA are forward-looking statements and are not guarantees of future performance or outcomes and that actual results may differ materially from those described above. Factors that could cause actual results to differ from those described above are set forth in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” You should read this information together with the financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for prior periods included in this prospectus.



 

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Risk Factors

Our business is subject to numerous risks. See “Risk Factors” beginning on page 22. In particular, our business may be adversely affected by:

 

    disruptions in general economic, social and business conditions, particularly in geographies or industry sectors that we or our clients serve, and adverse developments in the credit markets;

 

    our ability to compete globally, or in local geographic markets or service lines that are material to us, and the extent to which further industry consolidation, fragmentation or innovation could lead to significant future competition;

 

    social, political and economic risks in different countries as well as foreign currency volatility;

 

    our ability to retain our senior management and attract and retain qualified and experienced employees;

 

    our reliance on our Principal Shareholders;

 

    the inability of our acquisitions to perform as expected and the unavailability of similar future opportunities;

 

    perceptions of our brand and reputation in the marketplace and our ability to appropriately address actual or perceived conflicts of interest;

 

    the operating and financial restrictions that our credit agreements impose on us and the possibility that in an event of default all of our borrowings may become immediately due and payable;

 

    the substantial amount of our indebtedness, our ability and the ability of our subsidiaries to incur substantially more debt and our ability to generate cash to service our indebtedness;

 

    the possibility we may face financial liabilities and/or damage to our reputation as a result of litigation;

 

    our dependence on long-term client relationships and on revenue received for services under various service agreements;

 

    our ability to execute information technology strategies, maintain the security of our information and technology networks and avoid or minimize the effect of an interruption or failure of our information technology, communications systems or data services;

 

    our ability to comply with new laws or regulations and changes in existing laws or regulations and to make correct determinations in complex tax regimes;

 

    our ability to execute on our strategy for operational efficiency successfully;

 

    our expectation to be a “controlled company” within the meaning of the NYSE corporate governance standards, which would allow us to qualify for exemptions from certain corporate governance requirements; and

 

    the fact that the Principal Shareholders will retain significant influence over us and key decisions about our business following the offering that could limit other shareholders’ ability to influence the outcome of matters submitted to shareholders for a vote.


 

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The Offering

 

Issuer

Cushman & Wakefield plc

 

Ordinary shares we are offering

45,000,000 shares

 

Underwriters’ option to purchase additional shares

We may sell up to 6,750,000 additional shares if the underwriters exercise their option to purchase additional shares in full.

 

Ordinary shares to be outstanding after this offering

198,209,294 shares (or 204,959,294 shares if the underwriters exercise in full their option to purchase additional ordinary shares).

 

Use of proceeds

We estimate that our net proceeds from this offering will be approximately $719.3 million at an assumed initial public offering price of $17.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses.

 

  We expect to use the net proceeds of this offering as follows:

 

    approximately $470.0 million to reduce outstanding indebtedness, in particular to repay our Second Lien Loan (as defined in “Description of Certain Indebtedness”);

 

    approximately $130.0 million to repay the outstanding amount of the deferred payment obligation related to our acquisition of Cassidy Turley;

 

    approximately $11.9 million to terminate our management services agreement; and

 

    approximately $107.4 million for general corporate purposes.

 

  See “Use of Proceeds.”

 

Dividend policy

We do not expect to pay dividends on our ordinary shares for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used for the operation and growth of our business.

 

  See “Dividend Policy.”

 

Risk Factors

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 22 for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.

 

Proposed NYSE symbol

“CWK”


 

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Conflicts of interest

Certain affiliates of TPG Capital BD, LLC, an underwriter in this offering, will own in excess of 10% of our issued and outstanding ordinary shares following this offering. As a result of the foregoing relationship, TPG Capital BD, LLC is deemed to have a “conflict of interest” within the meaning of FINRA Rule 5121. Accordingly, this offering will be made in compliance with the applicable provisions of FINRA Rule 5121. Pursuant to that rule, the appointment of a qualified independent underwriter is not necessary in connection with this offering. In accordance with FINRA Rule 5121(c), no sales of the shares will be made to any discretionary account over which TPG Capital BD, LLC exercises discretion without the prior specific written approval of the account holder. See “Underwriters (Conflicts of Interest).”

The number of ordinary shares to be outstanding after the completion of this offering is based on 153,209,294 ordinary shares issued and outstanding as of July 23, 2018 and 45,000,000 shares to be sold in this offering, and excludes 9,800,000 shares reserved for issuance under the Management Plan (as defined herein) and 200,000 shares reserved to issuance under the Director Plan (as defined herein). The number of ordinary shares to be outstanding after the completion of this offering also excludes 113,523 ordinary shares in the aggregate to be issued in respect of vested options for which we have received notice of exercise and RSUs that are expected to settle prior to the effectiveness of this registration statement.

The number of ordinary shares to be outstanding after the completion of this offering includes 7,375,419 shares outstanding with respect to the deferred payment obligation related to the acquisition of Cassidy Turley, which remain subject to forfeiture by the holders thereof until full vesting. Because of the contractual forfeiture provisions, these shares are excluded from the outstanding share calculations for accounting purposes.

On July 20, 2018, Cushman & Wakefield plc undertook the Share Consolidation, which resulted in a proportional decrease in the number of ordinary shares outstanding as well as corresponding adjustments to outstanding options and RSUs. The ordinary share capital of the Company was consolidated and divided into 153,209,294 ordinary shares with a nominal value of $0.10 per share. Unless otherwise indicated, all references to numbers of ordinary shares, options and RSUs and corresponding conversion prices and/or exercise prices and all per ordinary share data give effect to the Share Consolidation.

In addition, except as otherwise noted, all information in this prospectus:

 

    assumes an initial public offering price of $17.00 per share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus; and

 

    assumes the underwriters do not exercise their option to purchase additional shares.

Of our outstanding option awards as of July 23, 2018, we have outstanding time-based options to purchase an aggregate of 3,343,967 shares, with a weighted average exercise price of $11.26 per share. We also have outstanding performance-based options that vest based on a multiple of the investment price of the Principal Shareholders measured at the time of a sale of shares by the Principal Shareholders. Assuming the Principal Shareholders sold all of their shares at a price equal to the midpoint of the estimated offering price range set forth on the cover of this prospectus of $17.00 per share, there would be no shares underlying performance-based options that vest as a result of such sale.



 

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Of our outstanding share-settled RSU awards as of July 23, 2018, we have outstanding time-based RSUs representing the right to receive an aggregate of 8,357,725 shares. We also have outstanding performance-based RSUs that vest based on a multiple of the investment price of the Principal Shareholders measured at the time of a sale of shares by the Principal Shareholders. Assuming the Principal Shareholders sold all of their shares at a price equal to the midpoint of the estimated offering price range set forth on the cover of this prospectus of $17.00 per share, there would be a total of 558,448 shares issued in connection with the vesting of performance-based RSUs as a result of such sale.

There would be no change to the number of performance-based options and RSUs that vest as a result of a sale at the high point of the price range on the cover of this prospectus.



 

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables present our summary historical and pro forma financial data for the periods presented. The summary historical consolidated statements of operations data for the years ended December 31, 2017, 2016 and 2015 and summary historical consolidated balance sheet data as of December 31, 2017 and 2016 have been derived from our audited Consolidated Financial Statements included elsewhere in this prospectus. The summary historical consolidated statements of operations data for the three months ended March 31, 2018 and 2017 and the summary historical consolidated balance sheet data as of March 31, 2018 have been derived from our unaudited interim Condensed Consolidated Financial Statements included elsewhere in this prospectus. In the opinion of management, the unaudited interim Condensed Consolidated Financial Statements include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and the operating results for these periods. Historical operating data may not be indicative of future performance. The operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 or any other interim periods or any future year or period.

On July 6, 2018, we completed the reorganization of our company through the Share Exchange and on July 19, 2018, we completed the Re-registration. Prior to the Share Exchange, our business was conducted by DTZ Jersey Holdings Limited and its consolidated subsidiaries. Following the Share Exchange and before the Re-registration, our business was conducted by Cushman & Wakefield Limited and its consolidated subsidiaries. Following the Re-registration, our business is conducted by Cushman & Wakefield plc and its consolidated subsidiaries.

You should read the following information together with “Risk Factors,” “Use of Proceeds,” “Capitalization,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical Consolidated Financial Statements and related notes included elsewhere in this prospectus. Historical results are not necessarily indicative of the results to be expected in the future.

 

Statement of Operations Data:   Three Months Ended
March 31,
  Year Ended December 31,
(in millions, except for per share data and share
data)
  2018   2017   2017   2016   2015

Revenue

  $ 1,767.7     $ 1,461.3     $ 6,923.9     $ 6,215.7     $ 4,193.2  

Operating loss

  $ (80.7   $ (120.2   $ (170.2   $ (313.4   $ (410.4

Net loss attributable to the Company

  $ (92.0   $ (119.7   $ (220.5   $ (449.1   $ (473.7

Net loss per share, basic and diluted:

         

Basic

  $ (0.63   $ (0.84   $ (1.53   $ (3.18   $ (5.46

Diluted

  $ (0.63   $ (0.84   $ (1.53   $ (3.18   $ (5.46

Pro forma basic (a)

  $ (0.43     $ (0.98    

Pro forma diluted (a)

  $ (0.43     $ (0.98    

Weighted Average Shares Outstanding (in thousands)

         

Basic

    145,277.3       143,084.7       143,935.0       141,431.6       86,816.2  

Diluted

    145,277.3       143,084.7       143,935.0       141,431.6       86,816.2  

Pro forma basic (a)

    181,273.2         179,930.9      

Pro forma diluted (a)

    181,273.2         179,930.9      

Balance Sheet Data (at period end):

         

Total assets

  $ 5,935.0       $ 5,797.9     $ 5,681.9     $ 5,442.2  

Total debt

  $ 3,066.6       $ 2,843.5     $ 2,660.1     $ 2,328.7  


 

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Other historical Data:   Three Months Ended
March 31,
    Year Ended December 31,  
(in millions, except for margin)   2018     2017     2017     2016     2015  

Fee Revenue (b)

  $     1,246.0     $     1,103.6     $     5,319.8     $     4,839.8     $     3,617.1  

Fee-based operating expenses (c)

  $ 1,326.6     $ 1,213.7     $ 5,466.8     $ 5,123.1     $ 3,928.0  

Americas Adjusted EBITDA

  $ 62.5     $ 35.0     $ 344.6     $ 311.6     $ 217.1  

EMEA Adjusted EBITDA

  $ (8.6   $ (12.8   $ 108.8     $ 90.8     $ 68.0  

APAC Adjusted EBITDA

  $ 20.9     $ 6.9     $ 75.1     $ 72.4     $ 50.8  

Adjusted EBITDA (d)

  $ 74.8     $ 29.1     $ 528.5     $ 474.8     $ 335.9  

Adjusted EBITDA Margin (d)

    6%            3%            10%          10%          9%     

 

(a)  The calculation of unaudited basic and diluted pro forma Net loss per share reflects certain pro forma adjustments in accordance with Article 11 of Regulation S-X. Unaudited basic and diluted pro forma Net income per ordinary share assumes that $470.0 million of the proceeds of the proposed offering were used to reduce outstanding indebtedness, in particular to repay our Second Lien Loan (as defined in “Description of Certain Indebtedness”), and includes a pro forma adjustment to reflect the elimination of interest expense in the amount of $11.1 million and $37.5 million related to debt repaid for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively, assuming that such proceeds and repayment occurred as of the beginning of the year. Unaudited basic and diluted pro forma Net income per ordinary share also assumes that $11.9 million of the proceeds of the proposed offering were used to make a one-time payment to TPG and PAG to terminate our management services agreement, and includes a pro forma adjustment to reflect the elimination of management advisory services fee expense in the amount of $1.2 million and $4.6 million for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively. Unaudited basic and diluted pro forma Net income per ordinary share also assumes approximately $130.0 million was used to repay the outstanding amount of the cash-settled portion of the Cassidy Turley deferred payment obligation, and includes pro forma adjustments to reflect (1) the elimination of the expense associated with the Cassidy Turley deferred payment obligation in the amount of $4.7 million and $20.8 million for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively; and (2) the elimination of the accrued interest expense incurred in connection with accrued portion of the obligation in the amount of $1.3 million and $5.3 million for the three months end March 31, 2018 and the year ended December 31, 2017, respectively. The number of shares used for purposes of pro forma per share data reflects the number of shares to be issued in the offering whose proceeds were used to (1) repay our Second Lien Loan, (2) make a one-time payment to TPG and PAG to terminate our management services agreement, and (3) repay the outstanding amount of the Cassidy Turley deferred payment obligation (assuming pricing at the midpoint of the price range set forth on the cover of this prospectus). The table below sets forth the computation of the Company’s pro forma unaudited basic and diluted pro forma net loss per share:

 

Pro forma net loss per share:

       
(in millions, except per share data)   Three Months Ended
March 31, 2018
    Year Ended December 31, 2017  
        Basic             Diluted                 Basic                     Diluted          
Net loss   $         (92.0)     $         (92.0)     $                 (220.5   $               (220.5
Pro forma adjustments:        
Net interest expense, net of tax     8.8       8.8       24.4       24.4  
Management advisory services fee, net of tax     0.9       0.9       3.0       3.0  
Cassidy Turley deferred payment obligation, net of tax     3.7       3.7       13.5       13.5  
Accrued interest on Cassidy Turley deferred payment obligation, net of tax     1.0       1.0       3.4       3.4  
 

 

 

   

 

 

   

 

 

   

 

 

 
Pro forma net loss   $ (77.6   $ (77.6   $ (176.2   $ (176.2
Weighted average ordinary shares outstanding     145,277.3       145,277.3       143,935.0       143,935.0  
Adjustment to weighted average ordinary shares outstanding related to the offering     35,995.9       35,995.9       35,995.9       35,995.9  
Pro forma weighted average ordinary shares outstanding (1)     181,273.2       181,273.2       179,930.9       179,930.9  
Pro forma net loss per share   $ (0.43   $ (0.43   $ (0.98   $ (0.98


 

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  (1)  Excludes impact of 9.0 million ordinary shares offered whose proceeds will be used for general corporate purposes. If all 45 million ordinary shares to be issued in this offering were reflected in the calculation above unaudited basic and diluted pro forma Net income per ordinary share as adjusted would be $(0.41) and $(0.94) for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively.

 

(b)  Fee revenue is a non-GAAP measure and is defined in the section “Use of Non-GAAP Financial Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following table presents a reconciliation of Fee revenue to revenue.

 

                                    
     Three Months Ended
March 31,
     Year Ended December 31,  
(in millions)    2018      2017      2017      2016      2015  

Revenue

   $ 1,767.7        $ 1,461.3        $ 6,923.9        $ 6,215.7        $ 4,193.2    

Less: Gross contract costs

     (521.8)         (367.8)         (1,627.3)         (1,406.0)         (675.6)   

Acquisition accounting adjustments

     0.1          10.1          23.2          30.1          99.5    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Fee Revenue

   $ 1,246.0        $ 1,103.6        $ 5,319.8        $ 4,839.8        $ 3,617.1    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)  Fee-based operating expenses is a non-GAAP measure and is defined in the section “Use of Non-GAAP Financial Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following table presents a reconciliation of Total costs and expenses to Fee-based operating expenses.

 

                                    
     Three Months Ended
March 31,
     Year Ended December 31,  
(in millions)    2018      2017      2017      2016      2015  

Total costs and expenses

   $ 1,848.4        $ 1,581.5        $ 7,094.1        $ 6,529.1        $ 4,603.6    

Less: Gross contract costs

     (521.8)         (367.8)         (1,627.3)         (1,406.0)         (675.6)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Fee-based operating expenses

   $ 1,326.6        $ 1,213.7        $ 5,466.8        $ 5,123.1        $ 3,928.0    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents a reconciliation of Fee-based operating expenses by segment to Consolidated Fee-based operating expenses (in millions):

 

     Three Months
Ended March 31,
     Year Ended December 31,  
     2018      2017      2017      2016      2015  

Americas fee-based operating expenses

   $ 787.6      $ 730.7      $ 3,251.7      $ 2,992.4      $ 2,187.0  

EMEA fee-based operating expenses

     173.3        142.2        688.5        605.9        463.4  

APAC fee-based operating expenses

     211.7        202.1        863.5        775.4        634.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Segment fee-based operating expenses

     1,172.6        1,075.0        4,803.7        4,373.7        3,284.7  

Depreciation and amortization

     69.8        63.0        270.6        260.6        155.9  
Integration and other costs related to acquisitions (1)      65.6        52.5        303.1        397.4        397.9  

Stock-based compensation

     6.1        8.1        28.2        40.8        15.4  

Cassidy Turley deferred payment obligation

     10.4        11.1        44.0        47.6        61.8  

Other

     2.1        4.0        17.2        3.0        12.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Fee-based operating expenses

   $ 1,326.6      $ 1,213.7      $ 5,466.8      $ 5,123.1      $ 3,928.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1)  Represents integration and other costs related to acquisitions, comprised of certain direct and incremental costs resulting from acquisitions and related integration efforts, as well as costs related to our restructuring programs. Excludes the impact of acquisition accounting revenue adjustments as these amounts do not impact operating expenses.


 

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(d)  Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures and are defined in the section “Use of Non-GAAP Financial Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following table presents a reconciliation of Adjusted EBITDA to net loss.

 

                               
    Three Months
Ended March 31,
    Year Ended December 31,  
(in millions)       2018             2017         2017     2016     2015  

Net loss

  $     (92.0   $     (119.7   $     (220.5   $     (449.1   $     (473.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add/(less):

         
Depreciation and amortization(1)     69.8       63.0       270.6       260.6       155.9  
Interest expense, net of interest income(2)     44.4       41.7       183.1       171.8       123.1  
Benefit from income taxes     (31.7     (41.7     (120.4     (27.4     (56.3
Integration and other costs related to acquisitions (3)     65.7       62.6       326.3       427.5       497.4  
Stock-based compensation (4)     6.1       8.1       28.2       40.8       15.4  
Cassidy Turley deferred payment obligation (5)     10.4       11.1       44.0       47.6       61.8  
Other (6)     2.1       4.0       17.2       3.0       12.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 74.8     $ 29.1     $ 528.5     $ 474.8     $ 335.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

  (1)  Depreciation and amortization includes merger and acquisition-related depreciation and amortization of $52 million and $45 million for the three months ended March 31, 2018 and 2017, respectively; and $193 million, $182 million and $109 million for the years ended December 31, 2017, 2016 and 2015, respectively.

 

  (2)  Interest expense, net of interest income includes one-time financing fees related to debt modification of $3 million for the three months ended March 31, 2018; $9 million and $20 million for the years ended December 31, 2016 and 2015, respectively.

 

  (3)  Integration and other costs related to acquisitions represents certain direct and incremental costs resulting from acquisitions and certain related integration efforts as a result of those acquisitions, as well as costs related to our restructuring efforts. Integration and other costs related to acquisitions includes impairment charges of $143.8 million for the year ended December 31, 2015, recorded against the DTZ trade name as a result of management’s plans to use the Cushman & Wakefield trade name after the C&W Group Merger.

 

  (4)  Stock-based compensation represents non-cash compensation expense associated with our equity compensation plans. Refer to Note 14: Share-based Payments from the Notes to the audited Consolidated Financial Statements for the year ended December 31, 2017 and Note 10: Share-based Payments from the Notes to the unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2018 for additional information.

 

  (5)  Cassidy Turley deferred payment obligation represents expense associated with a deferred payment obligation related to the acquisition of Cassidy Turley on December 31, 2014, which will be paid out before the end of 2018. Refer to Note 11: Employee Benefits of the Company’s audited Consolidated Financial Statements for additional information.

 

  (6)  Other includes sponsor management advisory services fees of approximately $1 million for the three months ended March 31, 2018; accounts receivable securitization costs of approximately $1 million and $3 million for the three months ended March 31, 2018 and 2017, respectively; and other items of approximately $1 million for the three months ended March 31, 2017.

Other includes sponsor management advisory services fees of approximately $5 million for each of the years ended December 31 2017, 2016, and 2015, respectively; accounts receivable securitization costs of approximately $8 million for the year ended December 31, 2017; and other items of approximately $4 million, $(2) million, and $7 million for the years ended December 31, 2017, 2016, and 2015, respectively.



 

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Expected Second Quarter 2018 Results

The estimated results for the three and six months ended June 30, 2018 are preliminary, unaudited and subject to completion, reflect management’s current views and may change as a result of management’s review of results and other factors. Such preliminary results are subject to the finalization of financial and accounting review procedures (which have yet to be performed) and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

Neither our independent registered public accounting firm nor any other independent registered public accounting firm has audited, reviewed or compiled, examined or performed any procedures with respect to the estimated results, nor have they expressed any opinion or any other form of assurance on the estimated results.

Fee revenue, Fee-based operating expenses, Adjusted EBITDA, Adjusted EBITDA margin and local currency to be relevant non-GAAP measures are non-GAAP measures and are defined in the section “Use of Non-GAAP Financial Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Further, we caution you that the estimates of total revenue, Fee revenue, total costs and expenses, Fee-based operating expenses, operating loss, net loss and Adjusted EBITDA are forward-looking statements and are not guarantees of future performance or outcomes and that actual results may differ materially from those described above. Factors that could cause actual results to differ from those described above are set forth in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” You should read this information together with the financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for prior periods included in this prospectus.

The following table provides selected results for the periods presented:

 

    Three
Months
Ended
June 30,

2018
    Three
Months
Ended
June 30,
2017
    % Change
in USD
    % Change
in Local
Currency
    Six Months
Ended
June 30,

2018
    Six Months
Ended
June 30,
2017
    % Change
in USD
    % Change
in Local
Currency
 
(in millions) (unaudited)   (Preliminary)     (Actual)     (Preliminary)     (Preliminary)     (Preliminary)     (Actual)     (Preliminary)     (Preliminary)  

Revenue:

               

Total revenue(1)(2)

  $ 1,974.3     $ 1,700.6       16     15   $ 3,742.0     $ 3,161.9       18     16

Less: Gross contract costs

    (532.3     (401.5     33     32     (1,054.1     (769.3     37     35

Acquisition accounting adjustments

    2.4       2.6       (8 )%      11     2.5       12.7       (80 )%      n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Fee revenue(2)

    1,444.4       1,301.7       11     10     2,690.4       2,405.3       12     10

Service Lines:

               

Property, facilities and project management

  $ 657.1     $ 617.3       6     6   $ 1,272.1     $ 1,205.2       6     4

Leasing

    476.1       396.9       20     18     796.0       675.8       18     16

Capital markets

    201.0       170.8       18     16     415.1       317.7       31     28

Valuation and other

    110.2       116.7       (6 )%      (8 )%      207.2       206.6       0     (4 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Fee revenue

    1,444.4       1,301.7       11     10     2,690.4       2,405.3       12     10

Total costs and expenses

    1,941.8       1,736.7       12     11     3,790.2       3,318.2       14     12
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

  $ 32.5     $ (36.1     (190 )%      (195 )%    $ (48.2   $ (156.3     (69 )%      (70 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(3)

  $ 169.8     $ 130.6       30     28   $ 244.6     $ 159.7       53     51

Adjusted EBITDA Margin

    12     10         9     7    


 

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(1)  Includes $99.3 million and $228.5 million in gross contract costs related to the adoption of Topic 606 for the three and six months ended June 30, 2018. See Note 5: Revenue of the Notes to the unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2018 for additional information.

 

(2)  Includes $15.2 million and $24.9 million in revenue increases related to the acceleration in the timing of revenue recognition under Topic 606 for the three and six months ended June 30, 2018.

 

(3)  Includes $6.4 million and $10.7 million in adjusted EBITDA increases related to the acceleration in the timing of revenue recognition under Topic 606 for the three and six months ended June 30, 2018.

The following table reconciles Adjusted EBITDA to net loss for the periods presented:

 

     Three Months Ended     Six Months Ended  
     June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
(in millions) (unaudited)    (Preliminary)     (Actual)     (Preliminary)     (Actual)  

Net loss

   $ (32.2   $ (47.3   $ (124.2   $ (167.0

Add/(less):

        

Depreciation and amortization(1)

     71.6       65.9       141.4       128.9  

Interest expense, net of interest income(2)

     52.0       44.0       96.4       85.7  

Provision (benefit) from income taxes

     15.1       (32.5     (16.6     (74.2

Integration and other costs related to acquisitions(3)

     41.1       79.2       106.8       141.8  

Stock-based compensation(4)

     8.8       6.2       14.9       14.3  

Cassidy Turley deferred payment obligation(5)

     10.9       11.0       21.3       22.1  

Other(6)

     2.5       4.1       4.6       8.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 169.8     $ 130.6     $ 244.6     $ 159.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Depreciation and amortization includes merger and acquisition-related depreciation and amortization of $52 million and $48 million and $104 million and $93 million for the three and six months ended June 30, 2018 and 2017, respectively.

 

(2)  Interest expense, net of interest income includes one-time write-off of financing fees incurred in relation to debt modifications of $3 million for the six months ended June 30, 2018.

 

(3)  Integration and other costs related to acquisitions represents certain direct and incremental costs resulting from acquisitions and certain related integration efforts as a result of those acquisitions, as well as costs related to our restructuring efforts.

 

(4)  Stock-based compensation represents non-cash compensation expense associated with our equity compensation plans. Refer to Note 14: Share-based Payments of the Notes to the audited Consolidated Financial Statements for the year ended December 31, 2017 and Note 10: Share-based Payments of the Notes to the unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2018 for additional information.

 

(5)  Cassidy Turley deferred payment obligation represents expense associated with a deferred payment obligation related to the acquisition of Cassidy Turley on December 31, 2014, which will be paid out before the end of 2018. Refer to Note 11: Employee Benefits of the Company’s audited Consolidated Financial Statements for additional information.

 

(6)  Other includes sponsor management advisory services fees of approximately $1 million and $2 million and $2 million and $2 million for the three and six months ended June 30, 2018 and 2017, respectively; accounts receivable securitization costs of approximately $2 million and $3 million and $2 million and $5 million for the three and six months ended June 30, 2018 and 2017; and other items.


 

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Below is the reconciliation of Total costs and expenses to Fee-based operating expenses:

 

     Three Months Ended     Six Months Ended  
     June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
(in millions) (unaudited)    (Preliminary)     (Actual)     (Preliminary)     (Actual)  

Total costs and expenses

   $ 1,941.8     $ 1,736.7     $ 3,790.2     $ 3,318.2  

Less: Gross contract costs

     (532.3     (401.5     (1,054.1     (769.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Fee-based operating expenses

   $ 1,409.5     $ 1,335.2     $ 2,736.1     $ 2,548.9  
  

 

 

   

 

 

   

 

 

   

 

 

 


 

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RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. Risks associated with an investment in our ordinary shares include, but are not limited to, the risk factors described below. If any of the risks described below actually occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, the trading price of our ordinary shares could decline and you may lose all or part of your investment. You should carefully consider all the information in this prospectus, including the risks and uncertainties described below as well as our Consolidated Financial Statements and related notes included elsewhere in this prospectus, before making an investment decision.

Risks Related to Our Business

The success of our business is significantly related to general economic conditions and, accordingly, our business, operations and financial condition could be adversely affected by economic slowdowns, liquidity crises, fiscal or political uncertainty and possible subsequent downturns in commercial real estate asset values, property sales and leasing activities in one or more of the geographies or industry sectors that we or our clients serve.

Periods of economic weakness or recession, significantly rising interest rates, fiscal or political uncertainty, market volatility, declining employment levels, declining demand for commercial real estate, falling real estate values, disruption to the global capital or credit markets or the public perception that any of these events may occur may negatively affect the performance of some or all of our service lines.

Our results of operations are significantly impacted by economic trends, government policies and the global and regional real estate markets. These include the following: overall economic activity, changes in interest rates, the impact of tax and regulatory policies, the cost and availability of credit and the geopolitical environment.

Adverse economic conditions or political or regulatory uncertainty could also lead to a decline in property sales prices as well as a decline in funds invested in existing commercial real estate assets and properties planned for development, which in turn could reduce the commissions and fees that we earn. In addition, economic downturns may reduce demand for our valuation and other service line and sales transactions and financing services in our capital markets service line.

The performance of our property management services depends upon the performance of the properties we manage. This is because our fees are generally based on a percentage of rent collections from these properties. Rent collections may be affected by many factors, including: (1) real estate and financial market conditions prevailing generally and locally; (2) our ability to attract and retain creditworthy tenants, particularly during economic downturns; and (3) the magnitude of defaults by tenants under their respective leases, which may increase during distressed economic conditions.

Our service lines could also suffer from political or economic disruptions that affect interest rates or liquidity or create financial, market or regulatory uncertainty. For example, the U.K. has submitted formal notification under Article 50 of the Lisbon Treaty to the European Council of the U.K. to withdraw its membership in the European Union (commonly known as “Brexit”). Speculation about the terms and consequences of Brexit for the U.K. and other European Union members has caused and may continue to cause market volatility and currency fluctuations and adversely impact our clients’ confidence, which has resulted and may continue to result in a deterioration in our EMEA segment as leasing and investing activity slowed.

In continental Europe and Asia Pacific, the economies in certain countries where we operate can be uncertain, which may adversely affect our financial performance. Economic, political and regulatory uncertainty as well as significant changes and volatility in the financial markets and business environment, and in the global landscape, make it increasingly difficult for us to predict our financial performance into the future. As a result, any guidance or outlook that we provide on our performance is based on then-current conditions, and there is a risk that such guidance may turn out to be inaccurate.

 

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We have numerous local, regional and global competitors across all of our service lines and the geographies that we serve, and further industry consolidation, fragmentation or innovation could lead to significant future competition.

We compete across a variety of service lines within the commercial real estate services and investment industry, including property, facilities and project management, leasing, capital markets (including representation of both buyers and sellers in real estate sales transactions and the arrangement of financing), and advisory on real estate debt and equity decisions. Although we are one of the largest commercial real estate services firms in the world as measured by 2017 revenue, our relative competitive position varies significantly across geographies, property types and service lines. Depending on the geography, property type or service line, we face competition from other commercial real estate services providers and investment firms, including outsourcing companies that have traditionally competed in limited portions of our property, facilities management and project management service line and have expanded their offerings from time to time, in-house corporate real estate departments, developers, institutional lenders, insurance companies, investment banking firms, investment managers, accounting firms and consulting firms. Some of these firms may have greater financial resources allocated to a particular geography, property type or service line than we have allocated to that geography, property type or service line. In addition, future changes in laws could lead to the entry of other new competitors, such as financial institutions. Although many of our existing competitors are local or regional firms that are smaller than we are, some of these competitors are larger on a local or regional basis. We are further subject to competition from large national and multinational firms that have similar service and investment competencies to ours, and it is possible that further industry consolidation could lead to much larger and more formidable competitors globally or in the particular geographies, property types, service lines that we serve. Our industry has continued to consolidate, as evidenced by CBRE Group, Inc.’s 2015 acquisition of the facilities management business of Johnson Controls, Inc., Jones Lang LaSalle Incorporated’s 2011 acquisition of King Sturge in Europe and other recent consolidations. Beyond our two direct competitors, CBRE Group, Inc. and Jones Lang LaSalle Incorporated, the sector is highly fragmented amongst regional, local and boutique providers. Although many of our competitors across our larger product and service lines are smaller local or regional firms, they may have a stronger presence in their core markets than we do. In addition, disruptive innovation by existing or new competitors could alter the competitive landscape in the future and require us to accurately identify and assess such changes and make timely and effective changes to our strategies and business model to compete effectively. There is no assurance that we will be able to compete effectively, to maintain current fee levels or margins, or maintain or increase our market share.

Adverse developments in the credit markets may harm our business, results of operations and financial condition.

Our capital markets (including representation of buyers and sellers in sales transactions and the arrangement of financing) and valuation and other service lines are sensitive to credit cost and availability as well as marketplace liquidity. Additionally, the revenues in all of our service lines are dependent to some extent on the overall volume of activity (and pricing) in the commercial real estate market.

Disruptions in the credit markets may adversely affect our advisory services to investors, owners, and occupiers of real estate in connection with the leasing, disposition and acquisition of property. If our clients are unable to procure credit on favorable terms, there may be fewer completed leasing transactions, dispositions and acquisitions of property. In addition, if purchasers of commercial real estate are not able to obtain favorable financing, resulting in the lack of disposition and acquisition opportunities for our projects, our valuation and other and capital markets service lines may be unable to generate incentive fees.

Our operations are subject to social, political and economic risks in different countries as well as foreign currency volatility.

We conduct a significant portion of our business and employ a substantial number of people outside of the United States and as a result, we are subject to risks associated with doing business globally. Our business

 

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consists of service lines operating in multiple regions inside and outside of the United States. Outside of the United States, we generate earnings in other currencies and our operating performance is subject to fluctuations relative to the U.S. dollar, or USD. As we continue to grow our international operations through acquisitions and organic growth, these currency fluctuations have the potential to positively or adversely affect our operating results measured in USD. It can be difficult to compare period-over-period financial statements when the movement in currencies against the USD does not reflect trends in the local underlying business as reported in its local currency.

Due to the constantly changing currency exposures to which we are subject and the volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. For example, Brexit was associated with a significant decline in the value of the British pound sterling against the USD in 2016 and negotiations with respect to the terms of the U.K.’s withdrawal or other changes to the membership or policies of the European Union, or speculation about such events, may be associated with increased volatility in the British pound sterling or other foreign currency exchange rates against the USD.

In addition to exposure to foreign currency fluctuations, our international operations expose us to international economic trends as well as foreign government policy measures. Additional circumstances and developments related to international operations that could negatively affect our business, financial condition or results of operations include, but are not limited to, the following factors:

 

   

difficulties and costs of staffing and managing international operations among diverse geographies, languages and cultures;

 

   

currency restrictions, transfer pricing regulations and adverse tax consequences, which may affect our ability to transfer capital and profits;

 

   

adverse changes in regulatory or tax requirements and regimes or uncertainty about the application of or the future of such regulatory or tax requirements and regimes;

 

   

the responsibility of complying with numerous, potentially conflicting and frequently complex and changing laws in multiple jurisdictions, e.g., with respect to data protection, privacy regulations, corrupt practices, embargoes, trade sanctions, employment and licensing;

 

   

the responsibility of complying with the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act and other anti-bribery, anti-money laundering and corruption laws;

 

   

the impact of regional or country-specific business cycles and economic instability;

 

   

greater difficulty in collecting accounts receivable in some geographic regions such as Asia, where many countries have underdeveloped insolvency laws;

 

   

a tendency for clients to delay payments in some European and Asian countries;

 

   

political and economic instability in certain countries;

 

   

foreign ownership restrictions with respect to operations in certain countries, particularly in Asia Pacific and the Middle East, or the risk that such restrictions will be adopted in the future; and

 

   

changes in laws or policies governing foreign trade or investment and use of foreign operations or workers, and any negative sentiments as a result of any such changes to laws or policies or due to trends such as populism, economic nationalism and against multinational companies.

 

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Our business activities are subject to a number of laws that prohibit various forms of corruption, including local laws that prohibit both commercial and governmental bribery and anti-bribery laws that have a global reach, such as the FCPA and the U.K. Bribery Act. Additionally, our business activities are subject to various economic and trade sanctions programs and import and export control laws, including (without limitation) the economic sanctions rules and regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), which prohibit or restrict transactions or dealings with specified countries and territories, their governments, and—in certain circumstances—their nationals, as well as with individuals and entities that are targeted by list-based sanctions programs. We maintain written policies and procedures and implement anti-corruption and anti-money laundering compliance programs, as well as programs designed to enable us to comply with applicable economic and trade sanctions programs and import and export control laws (“Compliance Programs”). However, coordinating our activities to address the broad range of complex legal and regulatory environments in which we operate presents significant challenges. Our current Compliance Programs may not address the full scope of all possible risks, or may not be adhered to by our employees or other persons acting on our behalf. Accordingly, we may not be successful in complying with regulations in all situations and violations may result in criminal or civil sanctions, including material monetary fines, penalties, equitable remedies (including disgorgement), and other costs against us or our employees, and may have a material adverse effect on our reputation and business.

In addition, we have penetrated, and seek to continue to enter into, emerging markets to further expand our global platform. However, certain countries in which we operate may be deemed to present heightened business, operational, legal and compliance risks. We may not be successful in effectively evaluating and monitoring the key business, operational, legal and compliance risks specific to those markets. The political and cultural risks present in emerging countries could also harm our ability to successfully execute our operations or manage our service lines there.

Our success depends upon the retention of our senior management, as well as our ability to attract and retain qualified and experienced employees.

We are dependent upon the retention of our leasing and capital markets professionals, who generate a significant amount of our revenues, as well as other revenue producing professionals. The departure of any of our key employees, including our senior executive leadership, or the loss of a significant number of key revenue producers, if we are unable to quickly hire and integrate qualified replacements, could cause our business, financial condition and results of operations to suffer. Competition for these personnel is significant, and our industry is subject to a relatively high turnover of broker and other key revenue producers, and we may not be able to successfully recruit, integrate or retain sufficiently qualified personnel. In addition, the growth of our business is largely dependent upon our ability to attract and retain qualified support personnel in all areas of our business. We and our competitors use equity incentives and sign-on and retention bonuses to help attract, retain and incentivize key personnel. As competition is significant for the services of such personnel, the expense of such incentives and bonuses may increase and we may be unable to attract or retain such personnel to the same extent that we have in the past. Any significant decline in, or failure to grow, our ordinary share price may result in an increased risk of loss of these key personnel. Furthermore, shareholder influence on our compensation practices, including our ability to issue equity compensation, may decrease our ability to offer attractive compensation to key personnel and make recruiting, retaining and incentivizing such personnel more difficult. If we are unable to attract and retain these qualified personnel, our growth may be limited and our business and operating results could suffer.

We rely on our Principal Shareholders.

We have in recent years depended on our relationship with our Principal Shareholders to help guide our business plan. Our Principal Shareholders have significant expertise in operational, financial, strategic and other matters. This expertise has been available to us through the representatives the Principal Shareholders have had on our board of directors and as a result of our management services agreement with the Principal Shareholders.

 

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Pursuant to a shareholders’ agreement to be executed in connection with the closing of this offering, representatives of the Principal Shareholders will have the ability to appoint five of the seats on our board of directors, and as a result Jonathan Coslet, Timothy Dattels, Qi Chen, Lincoln Pan, and Rajeev Ruparelia will be appointed to our board of directors. After the offering, the Principal Shareholders may elect to reduce their ownership in our company or reduce their involvement on our board of directors, which could reduce or eliminate the benefits we have historically achieved through our relationship with them.

Our growth has benefited significantly from acquisitions, which may not perform as expected, and similar opportunities may not be available in the future.

A significant component of our growth over time has been generated by acquisitions. Starting in 2014, the Principal Shareholders and management have built our company through the combination of DTZ, Cassidy Turley and C&W Group. Any future growth through acquisitions will depend in part upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions, which may not be available to us, as well as sufficient funds from our cash on hand, cash flow from operations, existing debt facilities and additional indebtedness to fund these acquisitions. We may incur significant additional debt from time to time to finance any such acquisitions, subject to the restrictions contained in the documents governing our then-existing indebtedness. If we incur additional debt, the risks associated with our leverage, including our ability to service our then-existing debt, would increase. Acquisitions involve risks that business judgments concerning the value, strengths and weaknesses of businesses acquired may prove incorrect. Future acquisitions and any necessary related financings also may involve significant transaction-related expenses, which include severance, lease termination, transaction and deferred financing costs, among others. See “—Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.”

We have had, and may continue to experience, challenges in integrating operations, brands and information technology systems acquired from other companies. This could result in the diversion of management’s attention from other business concerns and the potential loss of our key employees or clients or those of the acquired operations. The integration process itself may be disruptive to our business and the acquired company’s businesses as it requires coordination of geographically diverse organizations and implementation of new branding, i.e., transitioning to the “Cushman & Wakefield” brand, and accounting and information technology systems. There is generally an adverse impact on net income for a period of time after the completion of an acquisition driven by transaction-related and integration expenses. Acquisitions also frequently involve significant costs related to integrating information technology and accounting and management services.

We complete acquisitions with the expectation that they will result in various benefits, including enhanced revenues, a strengthened market position, cross-selling opportunities, cost synergies and tax benefits. Achieving the anticipated benefits of these acquisitions is subject to a number of uncertainties, including the realization of accretive benefits in the timeframe anticipated, whether we will experience greater-than-expected attrition from professionals licensed or associated with acquired firms and whether we can successfully integrate the acquired business. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could in turn materially and adversely affect our overall business, financial condition and operating results.

Our brand and reputation are key assets of our company, and our business may be affected by how we are perceived in the marketplace.

Our brand and its attributes are key assets, and we believe our continued success depends on our ability to preserve, grow and leverage the value of our brand. Our ability to attract and retain clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, management, workplace culture, financial condition, our response to unexpected events and other subjective qualities. Negative perceptions or publicity regarding these matters, even if related to seemingly isolated incidents and whether or

 

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not factually correct, could erode trust and confidence and damage our reputation among existing and potential clients, which could make it difficult for us to attract new clients and maintain existing ones. Negative public opinion could result from actual or alleged conduct in any number of activities or circumstances, including handling of client complaints, regulatory compliance, such as compliance with the FCPA, the U.K. Bribery Act and other anti-bribery, anti-money laundering and corruption laws, the use and protection of client and other sensitive information and from actions taken by regulators or others in response to such conduct. Social media channels can also cause rapid, widespread reputational harm to our brand.

Our brand and reputation may also be harmed by actions taken by third parties that are outside our control. For example, any shortcoming of or controversy related to a third-party vendor may be attributed to us, thus damaging our reputation and brand value and increasing the attractiveness of our competitors’ services. Also, business decisions or other actions or omissions of our joint venture partners, the Principal Shareholders or management may adversely affect the value of our investments, result in litigation or regulatory action against us and otherwise damage our reputation and brand. Adverse developments with respect to our industry may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us. Furthermore, as a company with headquarters and operations located in the United States, a negative perception of the United States arising from its political or other positions could harm the perception of our company and our brand. Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our revenues and profitability.

The protection of our brand, including related trademarks, may require the expenditure of significant financial and operational resources. Moreover, the steps we take to protect our brand may not adequately protect our rights or prevent third parties from infringing or misappropriating our trademarks. Even when we detect infringement or misappropriation of our trademarks, we may not be able to enforce all such trademarks. Any unauthorized use by third parties of our brand may adversely affect our brand. Furthermore, as we continue to expand our business, especially internationally, there is a risk we may face claims of infringement or other alleged violations of third-party intellectual property rights, which may restrict us from leveraging our brand in a manner consistent with our business goals.

Our credit agreements impose operating and financial restrictions on us, and in an event of a default, all of our borrowings would become immediately due and payable.

Our credit agreements impose, and the terms of any future debt may impose, operating and other restrictions on us and many of our subsidiaries. These restrictions affect, and in many respects limit or prohibit, our ability to:

 

   

plan for or react to market conditions;

 

   

meet capital needs or otherwise carry out our activities or business plans; and

 

   

finance ongoing operations, strategic acquisitions, investments or other capital needs or engage in other business activities that would be in our interest, including:

 

   

incurring or guaranteeing additional indebtedness;

 

   

granting liens on our assets;

 

   

undergoing fundamental changes;

 

   

making investments;

 

   

selling assets;

 

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    making acquisitions;

 

    engaging in transactions with affiliates;

 

    amending or modifying certain agreements relating to junior financing and charter documents;

 

    paying dividends or making distributions on or repurchases of share capital;

 

    repurchasing equity interests or debt;

 

    transferring or selling assets, including the stock of subsidiaries; and

 

    issuing subsidiary equity or entering into consolidations and mergers.

In addition, under certain circumstances we will be required to satisfy and maintain specified financial ratios and other financial condition tests under certain covenants in our First Lien Credit Agreement. See “Description of Certain Indebtedness.” Our ability to comply with the terms of our credit agreements can be affected by events beyond our control, including prevailing economic, financial market and industry conditions, and we cannot give assurance that we will be able to comply when required. These terms could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other opportunities. We continue to monitor our projected compliance with the terms of our credit agreements.

A breach of any restrictive covenants in our credit agreements could result in an event of default under our debt instruments. If any such event of default occurs, the lenders under our credit agreements may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. The lenders under our credit agreements also have the right in these circumstances to terminate any commitments they have to provide further borrowings and to foreclose on collateral pledged under the credit agreements. In addition, an event of default under our credit agreements could trigger a cross-default or cross-acceleration under our other material debt instruments and credit agreements.

Our credit agreements are jointly and severally guaranteed by substantially all of our material subsidiaries organized in the United States, England and Wales, Australia and Singapore, subject to certain exceptions. Each guarantee is secured by a pledge of substantially all of the assets of the subsidiary giving the pledge.

Moody’s Investors Service, Inc. and S&P Global Ratings rate our significant outstanding debt. These ratings, and any downgrades or any written notice of any intended downgrading or of any possible change, may affect our ability to borrow as well as the costs of our future borrowings.

We have a substantial amount of indebtedness, which may adversely affect our available cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.

We have a substantial amount of indebtedness. As of March 31, 2018, our total debt was approximately $3.1 billion, nearly all of which consisted of debt under our credit agreements. Our First Lien Loan (as defined in “Description of Certain Indebtedness”) had a balance, net of deferred financing fees, at March 31, 2018 of $2.6 billion, and our Second Lien Loan had a balance, net of deferred financing fees, of $460.0 million. As of March 31, 2018, we had no outstanding funds drawn under our Revolver (as defined in “Description of Certain Indebtedness”). For more information regarding our existing indebtedness, see “Description of Certain Indebtedness.”

 

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Our level of indebtedness increases the possibility that we may be unable to pay the principal amount of our indebtedness and other obligations when due. Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences. For example, it could:

 

   

make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under such instruments;

 

   

make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

 

   

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

 

   

expose us to the risk that if unhedged, or if our hedges are ineffective, interest expense on our variable rate indebtedness will increase;

 

   

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

   

place us at a competitive disadvantage compared to our competitors that are less highly leveraged and therefore able to take advantage of opportunities that our indebtedness prevents us from exploiting;

 

   

limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes; and

 

   

cause us to pay higher rates if we need to refinance our indebtedness at a time when prevailing market interest rates are unfavorable.

Any of the above listed factors could have a material adverse effect on our business, prospects, results of operations and financial condition.

Furthermore, our interest expense would increase if interest rates increase because our debt under our credit agreements bears interest at floating rates, which could adversely affect our cash flows. If we do not have sufficient earnings to service our debt, we may be required to refinance all or part of our existing debt, including the First Lien Loan and Second Lien Loan, sell assets, borrow more money or sell additional equity. There is no guarantee that we would be able to meet these requirements.

Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.

We may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents governing our indebtedness. Although the credit agreements contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and the debt incurred in compliance with these restrictions could be substantial. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase.

 

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To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations could have a material adverse effect on our business, prospects, results of operations and financial condition.

Our ability to pay interest on and principal of our debt obligations principally depends upon our operating performance. As a result, prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to make these payments and reduce indebtedness over time.

In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment or otherwise. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.

If we do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our indebtedness, including our First Lien Loan and Second Lien Loan, selling assets or seeking to raise additional capital. Our ability to restructure or refinance our indebtedness, including our First Lien Loan and Second Lien Loan, if at all, will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of existing or future debt instruments may restrict us from adopting some of these alternatives. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance our obligations at all or on commercially reasonable terms, could affect our ability to satisfy our debt obligations and have a material adverse effect on our business, prospects, results of operations and financial condition.

We are subject to various litigation risks and may face financial liabilities and/or damage to our reputation as a result of litigation.

We are exposed to various litigation risks and from time to time are party to various legal proceedings that involve claims for substantial amounts of money. We depend on our business relationships and our reputation for high-caliber professional services to attract and retain clients. As a result, allegations against us, irrespective of the ultimate outcome of that allegation, may harm our professional reputation and as such materially damage our business and its prospects, in addition to any financial impact.

As a licensed real estate broker and provider of commercial real estate services, we and our licensed sales professionals and independent contractors that work for us are subject to statutory due diligence, disclosure and standard-of-care obligations. Failure to fulfill these obligations could subject us or our sales professionals or independent contractors to litigation from parties who purchased, sold or leased properties that we brokered or managed in the jurisdictions in which we operate.

We are subject to claims by participants in real estate sales and leasing transactions, as well as building owners and companies for whom we provide management services, claiming that we did not fulfill our obligations. We are also subject to claims made by clients for whom we provided appraisal and valuation services and/or third parties who perceive themselves as having been negatively affected by our appraisals and/or valuations. We also could be subject to audits and/or fines from various local real estate authorities if they determine that we are violating licensing laws by failing to follow certain laws, rules and regulations.

In our property, facilities and project management service line, we hire and supervise third-party contractors to provide services for our managed properties. We may be subject to claims for defects, negligent performance of work or other similar actions or omissions by third parties we do not control. Moreover, our clients may seek

 

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to hold us accountable for the actions of contractors because of our role as property or facilities manager or project manager, even if we have technically disclaimed liability as a contractual matter, in which case we may be pressured to participate in a financial settlement for purposes of preserving the client relationship.

Because we employ large numbers of building staff in facilities that we manage, we face the risk of potential claims relating to employment injuries, termination and other employment matters. While we are generally indemnified by the building owners in respect of such claims, we can provide no assurance that will continue to be the case. We also face employment-related claims as an employer with respect to our corporate and other employees for which we would bear ultimate responsibility in the event of an adverse outcome in such matters.

In addition, especially given the size of our operations, there is always a risk that a third party may claim that our systems or offerings, including those used by our brokers and clients, may infringe such third party’s intellectual property rights and may result in claims or suits by third parties. Any such claims or litigation, whether successful or unsuccessful, could require us to enter into settlement agreements with such third parties (which may not be on terms favorable to us), to stop or revise our use or sale of affected systems, products or services or to pay damages, which could materially negatively affect our business.

Adverse outcomes of property and facilities management disputes and related or other litigation could have a material adverse effect on our business, financial condition, results of operations and prospects, particularly to the extent we may be liable on our contracts, or if our liabilities exceed the amounts of the insurance coverage procured and maintained by us. Some of these litigation risks may be mitigated by any the commercial insurance policies we maintain in amounts we believe are appropriate. However, in the event of a substantial loss or certain types of claims, our insurance coverage and/or self-insurance reserve levels might not be sufficient to pay the full damages.

Adverse outcomes of property and facilities management disputes and related or other litigation could have a material adverse effect on our business, financial condition, results of operations and prospects, particularly to the extent we may be liable on our contracts, or if our liabilities exceed the amounts of the insurance coverage procured and maintained by us. Some of these litigation risks may be mitigated by the commercial insurance policies we maintain. However, in the event of a substantial loss or certain types of claims, our insurance coverage and/or self-insurance reserve levels might not be sufficient to pay the full damages. Additionally, in the event of grossly negligent or intentionally wrongful conduct, insurance policies that we may have may not cover us at all. Further, the value of otherwise valid claims we hold under insurance policies could become uncollectible in the event of the covering insurance company’s insolvency, although we seek to limit this risk by placing our commercial insurance only with highly rated companies. Any of these events could materially negatively impact our business, financial condition, results of operations and prospects.

We are substantially dependent on long-term client relationships and on revenue received for services under various service agreements.

Many of the service agreements we have with our clients may be canceled by the client for any reason with as little as 30 to 60 days’ notice, as is typical in the industry. Some agreements related to our leasing service line may be rescinded without notice. In this competitive market, if we are unable to maintain long-term client relationships or are otherwise unable to retain existing clients and develop new clients, our business, results of operations and/or financial condition may be materially adversely affected. The global economic downturn and resulting weaknesses in the markets in which they themselves compete led to additional pricing pressure from clients as they came under financial pressure. These effects have continued to moderate, but they could increase again in the wake of the continuing political and economic uncertainties within the European Union, the United States and China, including as a result of volatility in oil and commodity prices, changes in trade policies and other political and commercial factors over which we have no control.

 

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The concentration of business with corporate clients can increase business risk, and our business can be adversely affected due to the loss of certain of these clients.

We value the expansion of business relationships with individual corporate clients because of the increased efficiency and economics that can result from developing recurring business from performing an increasingly broad range of services for the same client. Although our client portfolio is currently highly diversified, as we grow our business, relationships with certain corporate clients may increase, and our client portfolio may become increasingly concentrated. For example, part of our strategy is to increase our revenues from existing clients which may lead to an increase in corporate clients and therefore greater concentration of revenues. Having increasingly large and concentrated clients also can lead to greater or more concentrated risks if, among other possibilities, any such client (1) experiences its own financial problems; (2) becomes bankrupt or insolvent, which can lead to our failure to be paid for services we have previously provided or funds we have previously advanced; (3) decides to reduce its operations or its real estate facilities; (4) makes a change in its real estate strategy, such as no longer outsourcing its real estate operations; (5) decides to change its providers of real estate services; or (6) merges with another corporation or otherwise undergoes a change of control, which may result in new management taking over with a different real estate philosophy or in different relationships with other real estate providers.

Where we provide real estate services to firms in the financial services industry, including banks and investment banks, we are experiencing indirectly the increasing extent of the regulatory environment to which they are subject in the aftermath of the global financial crisis. This increases the cost of doing business with them, which we are not always able to pass on, as a result of the additional resources and processes we are required to provide as a critical supplier.

Significant portions of our revenue and cash flow are seasonal, which could cause our financial results and liquidity to fluctuate significantly.

A significant portion of our revenue is seasonal, especially for service lines such as leasing and capital markets, which impacts the comparison of our financial condition and results of operations on a quarter-by-quarter basis. Historically, our fee revenue and operating profit tend to be lowest in the first quarter, and highest in the fourth quarter of each year. Also, we have historically relied on our internally generated cash flow to fund our working capital needs and ongoing capital expenditures on an annual basis. Our internally generated cash flow is seasonal and is typically lowest in the first quarter of the year, when fee revenue is lowest and largest in the fourth quarter of the year when fee revenue is highest. This variance among periods makes it difficult to compare our financial condition and results of operations on a quarter-by-quarter basis. In addition, the seasonal nature of our internally generated cash flow can result in a mismatch with funding needs for working capital and ongoing capital expenditures, which we manage using available cash on hand and, as necessary, our revolving credit facility. We are therefore dependent on the availability of cash on hand and our debt facilities, especially in the first and second quarters of the year. Further, as a result of the seasonal nature of our business, political, economic or other unforeseen disruptions occurring in the fourth quarter that impact our ability to close large transactions may have a disproportionate effect on our financial condition and results of operations.

A failure to appropriately address actual or perceived conflicts of interest could adversely affect our service lines.

Our Company has a global business with different service lines and a broad client base and is therefore subject to numerous potential, actual or perceived conflicts of interests in the provision of services to our existing and potential clients. For example, conflicts may arise from our position as broker to both owners and tenants in commercial real estate lease transactions. We have adopted various policies, controls and procedures to address or limit actual or perceived conflicts, but these policies and procedures may not be adequate and may not be adhered to by our employees. Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged and cause us to lose existing clients or fail to gain new clients if we fail, or appear

 

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to fail, to identify, disclose and manage potential conflicts of interest, which could have an adverse effect on our business, financial condition and results of operations. In addition, it is possible that in some jurisdictions regulations could be changed to limit our ability to act for parties where conflicts exist even with informed consent, which could limit our market share in those markets. There can be no assurance that conflicts of interest will not arise in the future that could cause material harm to us.

Failure to maintain and execute information technology strategies and ensure that our employees adapt to changes in technology could materially and adversely affect our ability to remain competitive in the market.

Our business relies heavily on information technology, including on solutions provided by third parties, to deliver services that meet the needs of our clients. If we are unable to effectively execute and maintain our information technology strategies or adopt new technologies and processes relevant to our service platform, our ability to deliver high-quality services may be materially impaired. In addition, we make significant investments in new systems and tools to achieve competitive advantages and efficiencies. Implementation of such investments in information technology could exceed estimated budgets and we may experience challenges that prevent new strategies or technologies from being realized according to anticipated schedules. If we are unable to maintain current information technology and processes or encounter delays, or fail to exploit new technologies, then the execution of our business plans may be disrupted. Similarly, our employees require effective tools and techniques to perform functions integral to our business. Our payroll and compensation technology systems are important to ensuring that key personnel, in particular commission based personnel, are compensated accurately and on a timely basis. Failure to pay professionals the compensation they are due in a timely manner could result in higher attrition. Failure to successfully provide such tools and systems, or ensure that employees have properly adopted them, could materially and adversely impact our ability to achieve positive business outcomes.

Failure to maintain the security of our information and technology networks, including personally identifiable and client information, intellectual property and proprietary business information could significantly adversely affect us.

Security breaches and other disruptions of our information and technology networks could compromise our information and intellectual property and expose us to liability, reputational harm and significant remediation costs, which could cause material harm to our business and financial results. In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and intellectual property, and that of our clients and personally identifiable information of our employees, contractors and vendors, in our data centers and on our networks. The secure processing, maintenance and transmission of this information are critical to our operations. Despite our security measures, and those of our third-party service providers, our information technology and infrastructure may be vulnerable to attacks by third parties or breached due to employee error, malfeasance or other disruptions. A significant actual or potential theft, loss, corruption, exposure, fraudulent use or misuse of client, employee or other personally identifiable or proprietary business data, whether by third parties or as a result of employee malfeasance or otherwise, non-compliance with our contractual or other legal obligations regarding such data or intellectual property or a violation of our privacy and security policies with respect to such data could result in significant remediation and other costs, fines, litigation or regulatory actions against us. Such an event could additionally disrupt our operations and the services we provide to clients, harm our relationships with contractors and vendors, damage our reputation, result in the loss of a competitive advantage, impact our ability to provide timely and accurate financial data and cause a loss of confidence in our services and financial reporting, which could adversely affect our business, revenues, competitive position and investor confidence. Additionally, we rely on third parties to support our information and technology networks, including cloud storage solution providers, and as a result have less direct control over our data and information technology systems. Such third parties are also vulnerable to security breaches and compromised security systems, for which we may not be indemnified and which could materially adversely affect us and our reputation. Furthermore, our, or our third-party vendors’, inability to detect unauthorized use (for example, by current or former employees) or take appropriate or timely steps to enforce our intellectual property rights may have an adverse effect on our business.

 

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Interruption or failure of our information technology, communications systems or data services could impair our ability to provide our services effectively, which could damage our reputation and materially harm our operating results.

Our business requires the continued operation of information technology and communication systems and network infrastructure. Our ability to conduct our global business may be materially adversely affected by disruptions to these systems or infrastructure. Our information technology and communications systems are vulnerable to damage or disruption from fire, power loss, telecommunications failure, system malfunctions, computer viruses, cyber-attacks, natural disasters such as hurricanes, earthquakes and floods, acts of war or terrorism, employee errors or malfeasance, or other events which are beyond our control. With respect to cyberattacks and viruses, these pose growing threats to many companies, and we have been a target and may continue to be a target of such threats, which could expose us to liability, reputational harm and significant remediation costs and cause material harm to our business and financial results. In addition, the operation and maintenance of our systems and networks is in some cases dependent on third-party technologies, systems and services providers for which there is no certainty of uninterrupted availability. Any of these events could cause system interruption, delays and loss, corruption or exposure of critical data or intellectual property and may also disrupt our ability to provide services to or interact with our clients, contractors and vendors, and we may not be able to successfully implement contingency plans that depend on communication or travel. Furthermore, any such event could result in substantial recovery and remediation costs and liability to customers, business partners and other third parties. We have business continuity and disaster recovery plans and backup systems to reduce the potentially adverse effect of such events, but our disaster recovery planning may not be sufficient and cannot account for all eventualities, and a catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations, and as a result, our future operating results could be materially adversely affected.

Our business relies heavily on the use of software and commercial real estate data, some of which is purchased or licensed from third-party providers for which there is no certainty of uninterrupted availability. A disruption of our ability to access such software, including an inability to renew such licenses on the same or similar terms, or provide data to our professionals and/or our clients, contractors and vendors or an inadvertent exposure of proprietary data could damage our reputation and competitive position, and our operating results could be adversely affected.

Infrastructure disruptions may disrupt our ability to manage real estate for clients or may adversely affect the value of real estate investments we make on behalf of clients.

The buildings we manage for clients, which include some of the world’s largest office properties and retail centers, are used by numerous people daily. As a result, fires, earthquakes, floods, other natural disasters, defects and terrorist attacks can result in significant loss of life, and, to the extent we are held to have been negligent in connection with our management of the affected properties, we could incur significant financial liabilities and reputational harm.

Our goodwill and other intangible assets could become impaired, which may require us to take significant non-cash charges against earnings.

Under current accounting guidelines, we must assess, at least annually and potentially more frequently, whether the value of our goodwill and other intangible assets has been impaired. Any impairment of goodwill or other intangible assets as a result of such analysis would result in a non-cash charge against earnings, and such charge could materially adversely affect our reported results of operations, shareholders’ equity and our ordinary share price. A significant and sustained decline in our future cash flows, a significant adverse change in the economic environment, slower growth rates or if our ordinary share price falls below our net book value per share for a sustained period, could result in the need to perform additional impairment analysis in future periods.

 

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If we were to conclude that a future write-down of goodwill or other intangible assets is necessary, then we would record such additional charges, which could materially adversely affect our results of operations.

Our service lines, financial condition, results of operations and prospects could be adversely affected by new laws or regulations or by changes in existing laws or regulations or the application thereof. If we fail to comply with laws and regulations applicable to us, or make incorrect determinations in complex tax regimes, we may incur significant financial penalties.

We are subject to numerous federal, state, local and non-U.S. laws and regulations specific to the services we perform in our service lines. Brokerage of real estate sales and leasing transactions and the provision of valuation services requires us and our employees to maintain applicable licenses in each U.S. state and certain non-U.S. jurisdictions in which we perform these services. If we and our employees fail to maintain our licenses or conduct these activities without a license, or violate any of the regulations covering our licenses, we may be required to pay fines (including treble damages in certain states) or return commissions received or have our licenses suspended or revoked. A number of our services, including the services provided by certain of our indirect wholly-owned subsidiaries in the U.S., U.K., France and Japan, are subject to regulation or oversight by the SEC, FINRA, the Defense Security Service, the U.K. Financial Conduct Authority, the Autorité des Marchés Financiers (France), the Financial Services Agency (Japan), the Ministry of Land, Infrastructure, Transport and Tourism (Japan) or other self-regulatory organizations and foreign and state regulators. Compliance failures or regulatory action could adversely affect our business. We could be subject to disciplinary or other actions in the future due to claimed noncompliance with these regulations, which could have a material adverse effect on our operations and profitability.

We are also subject to laws of broader applicability, such as tax, securities, environmental, employment laws and anti-bribery, anti-money laundering and corruption laws, including the Fair Labor Standards Act, occupational health and safety regulations, U.S. state wage-and-hour laws, the FCPA and the U.K. Bribery Act. Failure to comply with these requirements could result in the imposition of significant fines by governmental authorities, awards of damages to private litigants and significant amounts paid in legal fees or settlements of these matters.

We operate in many jurisdictions with complex and varied tax regimes, and are subject to different forms of taxation resulting in a variable effective tax rate. In addition, from time to time we engage in transactions across different tax jurisdictions. Due to the different tax laws in the many jurisdictions where we operate, we are often required to make subjective determinations. The tax authorities in the various jurisdictions where we carry on business may not agree with the determinations that are made by us with respect to the application of tax law. Such disagreements could result in disputes and, ultimately, in the payment of additional funds to the government authorities in the jurisdictions where we carry on business, which could have an adverse effect on our results of operations. In addition, changes in tax rules or the outcome of tax assessments and audits could have an adverse effect on our results in any particular quarter.

As the size and scope of our business has increased significantly during the past several years, both the difficulty of ensuring compliance with numerous licensing and other regulatory requirements and the possible loss resulting from non-compliance have increased. The global economic crisis has resulted in increased government and legislative activities, including the introduction of new legislation and changes to rules and regulations, which we expect will continue into the future. New or revised legislation or regulations applicable to our business, both within and outside of the United States, as well as changes in administrations or enforcement priorities may have an adverse effect on our business, including increasing the costs of regulatory compliance or preventing us from providing certain types of services in certain jurisdictions or in connection with certain transactions or clients. For example, on May 25, 2018, the European General Data Protection Regulation will become effective with a greater territorial reach than existing laws and so may apply to many of our contracts and agreements throughout the world. To the extent it applies, we might be forced to update certain of our agreements, which may take significant time and cost. We are unable to predict how any of these new laws, rules,

 

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regulations and proposals will be implemented or in what form, or whether any additional or similar changes to laws or regulations, including the interpretation or implementation thereof, will occur in the future. Any such action could affect us in substantial and unpredictable ways and could have an adverse effect on our service lines, financial condition, results of operations and prospects.

Any failure by us to execute on our strategy for operational efficiency successfully could result in total costs and expenses that are greater than expected.

We have an operating framework that includes a disciplined focus on operational efficiency. As part of this framework, we have adopted several initiatives, including development of our technology platforms, workflow processes and systems to improve client engagement and outcomes across our service lines.

Our ability to continue to achieve the anticipated cost savings and other benefits from these initiatives within the expected time frame is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of which are beyond our control. In addition, we are vulnerable to increased risks associated with implementing changes to our tools, processes and systems given our varied service lines, the broad range of geographic regions in which we and our customers operate and the number of acquisitions that we have completed in recent years. If these estimates and assumptions are incorrect, if we are unsuccessful at implementing changes, if we experience delays, or if other unforeseen events occur, we may not achieve new or continue to achieve operational efficiencies and as a result our business and results of operations could be adversely affected.

We may be subject to environmental liability as a result of our role as a property or facility manager or developer of real estate.

Various laws and regulations impose liability on real property owners or operators for the cost of investigating, cleaning up or removing contamination caused by hazardous or toxic substances at a property. In our role as a property or facility manager or developer, we could be held liable as an operator for such costs. This liability may be imposed without regard to the legality of the original actions and without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. If we fail to disclose environmental issues, we could also be liable to a buyer or lessee of a property. If we incur any such liability, our business could suffer significantly as it could be difficult for us to develop or sell such properties, or borrow funds using such properties as collateral. In the event of a substantial liability, our insurance coverage might be insufficient to pay the full damages, or the scope of available coverage may not cover certain of these liabilities. Additionally, liabilities incurred to comply with more stringent future environmental requirements could adversely affect any or all of service lines.

 

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Risks Related to this Offering and Ownership of Our Ordinary Shares

We expect to be a “controlled company” within the meaning of the NYSE corporate governance standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements.

Upon completion of this offering, the Principal Shareholders will continue to control a majority of the voting power of our outstanding ordinary shares. As a result, we will be a “controlled company” as that term is set forth in the NYSE corporate governance standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements:

 

    that a majority of the board of directors consists of independent directors;

 

    that we have a nominating and corporate governance committee that is composed entirely of independent directors; and

 

    that we have a compensation committee that is composed entirely of independent directors.

These requirements will not apply to us as long as we remain a “controlled company.” Following this offering, we may utilize some or all of these exemptions. As a result, our nominating and corporate governance committee and compensation committee will not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance standards. The Principal Shareholders’ significant ownership interest could adversely affect investors’ perceptions of our corporate governance.

The Principal Shareholders will continue to have significant influence over us after this offering, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of key transactions, including a change of control, and which may result in conflicts with us or you in the future.

We are currently controlled, and after this offering is completed will continue to be controlled, by the Principal Shareholders. Upon consummation of this offering, the Principal Shareholders will own approximately 70% of our total ordinary shares outstanding (or 67% if the underwriters’ option to purchase additional ordinary shares is exercised in full). Pursuant to a shareholders’ agreement to be entered into in connection with the completion of this offering, the Principal Shareholders will have the right to designate five of the seats on our board of directors, and as a result Jonathan Coslet, Timothy Dattels, Qi Chen, Lincoln Pan and Rajeev Ruparelia will be appointed to our board of directors. In addition, the Principal Shareholders jointly have the right to designate for nomination one additional director, defined herein as the Joint Designee, who must qualify as independent under the NYSE rules and must meet the independence requirements of Rule 10A-3 of the Exchange Act, so long as they collectively own at least 50% of our total ordinary shares outstanding as of the closing of this offering. As a result, the Principal Shareholders will be able to exercise control over our affairs and policies, including the approval of certain actions such as amending our articles of association, commencing bankruptcy proceedings and taking certain actions (including, without limitation, incurring debt, issuing shares, selling assets and engaging in mergers and acquisitions), appointing members of our management and any transaction that requires shareholder approval regardless of whether others believe that such change or transaction is in our best interests. So long as the Principal Shareholders continue to hold a majority of our outstanding ordinary shares, the Principal Shareholders will have the ability to control the vote in any election of directors, amend our articles of association or take other actions requiring the vote of our shareholders. Even if the amount owned by the Principal Shareholders falls below 50%, the Principal Shareholders will continue to be able to strongly influence or effectively control our decisions. This control may also have the effect of deterring hostile takeovers, delaying

 

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or preventing changes of control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of our company.

Additionally, the Principal Shareholders’ interests may not align with the interests of our other shareholders. The Principal Shareholders are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. The Principal Shareholders may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Certain of our directors have relationships with the Principal Shareholders, which may cause conflicts of interest with respect to our business.

Following this offering, five of our seven directors will be affiliated with the Principal Shareholders. These directors have fiduciary duties to us and, in addition, have duties to the applicable Principal Shareholder. As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and the affiliated Principal Shareholder, whose interests may be adverse to ours in some circumstances.

Certain of our shareholders have the right to engage or invest in the same or similar businesses as us.

The Principal Shareholders have other investments and business activities in addition to their ownership of us. The Principal Shareholders have the right, and have no duty to abstain from exercising such right, to engage or invest in the same or similar businesses as us, do business with any of our clients, customers or vendors or employ or otherwise engage any of our officers, directors or employees. If the Principal Shareholders or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty, to the fullest extent permitted by law, to offer such corporate opportunity to us, our shareholders or our affiliates.

In the event that any of our directors and officers who is also a director, officer or employee of the Principal Shareholders acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person’s capacity as our director or officer and such person acts in good faith, then to the fullest extent permitted by law such person is deemed to have fully satisfied such person’s fiduciary duties owed to us and is not liable to us, if the Principal Shareholders pursue or acquire the corporate opportunity or if the Principal Shareholders do not present the corporate opportunity to us.

Additionally, the Principal Shareholders are in the business of making investments in companies and may currently hold, and may from time to time in the future acquire, controlling interests in businesses engaged in industries that complement or compete, directly or indirectly, with certain portions of our business. So long as the Principal Shareholders continue to indirectly own a significant amount of our equity, the Principal Shareholders will continue to be able to strongly influence or effectively control our decisions.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation organized in Delaware.

We are incorporated under the laws of England and Wales. The rights of holders of our ordinary shares are governed by the laws of England and Wales, including the provisions of the U.K. Companies Act 2006, and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations organized in Delaware. The principal differences are set forth in “Description of Share Capital—Differences in Corporate Law.”

U.S. investors may have difficulty enforcing civil liabilities against our company, our directors or members of senior management and the experts named in this prospectus.

We are incorporated under the laws of England and Wales. The United States and the United Kingdom do not currently have a treaty providing for the recognition and enforcement of judgments, other than arbitration

 

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awards, in civil and commercial matters. The enforceability of any judgment of a U.S. federal or state court in the United Kingdom will depend on the laws and any treaties in effect at the time, including conflicts of laws principles (such as those bearing on the question of whether a U.K. court would recognize the basis on which a U.S. court had purported to exercise jurisdiction over a defendant). In this context, there is doubt as to the enforceability in the United Kingdom of civil liabilities based solely on the federal securities laws of the United States. In addition, awards for punitive damages in actions brought in the United States or elsewhere may be unenforceable in the United Kingdom. An award for monetary damages under U.S. securities laws would likely be considered punitive if it did not seek to compensate the claimant for loss or damage suffered and was intended to punish the defendant.

English law and provisions in our articles of association may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders, and may prevent attempts by our shareholders to replace or remove our current management.

Certain provisions of the U.K. Companies Act 2006 and our articles of association may have the effect of delaying or preventing a change in control of us or changes in our management. For example, our articles of association include provisions that:

 

    create a classified board of directors whose members serve staggered three-year terms (but remain subject to removal as provided in our articles of association);

 

    establish an advance notice procedure for shareholder approvals to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to our board of directors;

 

    provide our board of directors the ability to grant rights to subscribe for our ordinary shares and/or depositary interests representing our ordinary shares without shareholder approval, which could be used to, among other things, institute a rights plan that would have the effect of significantly diluting the share ownership of a potential hostile acquirer;

 

    provide certain mandatory offer provisions, including, among other provisions, that a shareholder, together with persons acting in concert, that acquires 30 percent or more of our issued shares without making an offer to all of our other shareholders that is in cash or accompanied by a cash alternative would be at risk of certain sanctions from our board of directors unless they acted with the consent of our board of directors or the prior approval of the shareholders; and

 

    provide that vacancies on our board of directors may be filled by a vote of the directors or by an ordinary resolution of the shareholders, even though less than a quorum, where the number of directors is reduced below the minimum number fixed in accordance with the articles of association.

In addition, public limited companies are prohibited under the U.K. Companies Act 2006 from taking shareholder action by written resolution.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. See also “—Provisions in the U.K. City Code on Takeovers and Mergers may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders” and “Description of Share Capital—Articles of Association and English Law Considerations.”

 

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Provisions in the U.K. City Code on Takeovers and Mergers may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders.

The U.K. City Code on Takeovers and Mergers (“Takeover Code”) applies, among other things, to an offer for a public company whose registered office is in the United Kingdom (or the Channel Islands or the Isle of Man) and whose securities are not admitted to trading on a regulated market in the United Kingdom (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (“Takeover Panel”) to have its place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man). This is known as the “residency test.” The test for central management and control under the Takeover Code is different from that used by the U.K. tax authorities. Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the United Kingdom by looking at various factors, including the structure of our board of directors, the functions of the directors and where they are resident.

If at the time of a takeover offer the Takeover Panel determines that we have our place of central management and control in the United Kingdom, we would be subject to a number of rules and restrictions, including but not limited to the following: (1) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (2) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (3) we would be obliged to provide equality of information to all bona fide competing bidders.

As a public limited company incorporated in England and Wales, certain capital structure decisions will require shareholder approval, which may limit our flexibility to manage our capital structure.

The U.K. Companies Act 2006 provides that a board of directors of a public limited company may only allot shares (or grant rights to subscribe for or convertible into shares) with the prior authorization of shareholders, such authorization stating the maximum amount of shares that may be allotted under such authorization and specify the date on which such authorization will expire, being not more than five years, each as specified in the articles of association or relevant shareholder resolution. We have obtained authority from our shareholders to allot additional shares for a period of five years from July 18, 2018 (being the date on which the shareholder resolution was passed), which authorization will need to be renewed at least upon expiration (i.e., five years from July 18, 2018) but may be sought more frequently for additional five-year terms (or any shorter period).

Subject to certain limited exceptions, the U.K. Companies Act 2006 generally provides that existing shareholders of a company have statutory pre-emption rights when new shares in such company are allotted and issued for cash. However, it is possible for such statutory pre-emption right to be disapplied by either the articles of association of the company, or by shareholders passing a special resolution at a general meeting, being a resolution passed by at least 75% of the votes cast. Such a disapplication of statutory pre-emption rights may not be for more than five years from the date of adoption of the articles of association, if the disapplication is contained in the articles of association, or from the date of the special resolution, if the disapplication is by special resolution. We have obtained authority from our shareholders to disapply statutory pre-emption rights for a period of five years from July 18, 2018, which disapplication will need to be renewed upon expiration (i.e., at least every five years) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period).

Subject to certain limited exceptions, the U.K. Companies Act 2006 generally prohibits a public limited company from repurchasing its own shares without the prior approval of its shareholders by ordinary resolution, being a resolution passed by a simple majority of votes cast, and subject to compliance with other statutory formalities. Such authorization may not be for more than five years from the date on which such ordinary resolution is passed. See the section titled “Description of Share Capital.”

 

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Transfers of shares in Cushman & Wakefield plc outside DTC may be subject to stamp duty or stamp duty reserve tax in the U.K., which would increase the cost of dealing in shares in Cushman & Wakefield plc.

On completion of this offering, it is anticipated that the new ordinary shares will be issued to a nominee for The Depository Trust Company (“DTC”) and corresponding book-entry interests credited in the facilities of DTC. On the basis of current law and HM Revenue & Customs (“HMRC”) practice, no charges to U.K. stamp duty or stamp duty reserve tax (“SDRT”) are expected to arise on the issue of the ordinary shares into DTC’s facilities or on transfers of book-entry interests in ordinary shares within DTC’s facilities and you are strongly encouraged to hold your ordinary shares in book-entry form through the facilities of DTC.

A transfer of title in the ordinary shares from within the DTC clearance system to a purchaser out of the DTC clearance system and any subsequent transfers that occur entirely outside the DTC clearance system, will attract a charge to stamp duty at a rate of 0.5% of any consideration, which is normally payable by the transferee of the ordinary shares. Any such duty must be paid (and the relevant transfer document, if any, stamped by HMRC) before the transfer can be registered in the company books of Cushman & Wakefield plc. However, if those ordinary shares are redeposited into the DTC clearance system, the redeposit will attract stamp duty or SDRT at the rate of 1.5% to be paid by the transferor.

In connection with the completion of this offering, we expect to put in place arrangements to require that Cushman & Wakefield plc’s ordinary shares held in certificated form or otherwise outside the DTC clearance system cannot be transferred into the DTC clearance system until the transferor of the ordinary shares has first delivered the ordinary shares to a depositary specified by us so that stamp duty (or SDRT) may be collected in connection with the initial delivery to the depositary. Any such ordinary shares will be evidenced by a receipt issued by the depositary. Before the transfer can be registered in our books, the transferor will also be required to put the depositary in funds to settle the resultant liability to stamp duty (or SDRT), which will be charged at a rate of 1.5% of the value of the shares.

For further information about the U.K. stamp duty and SDRT implications of holding ordinary shares, please see the section entitled “Taxation—Certain U.K. Tax Considerations” of this prospectus.

Our articles of association to be effective in connection with the closing of this offering will provide that the courts of England and Wales will be the exclusive forum for the resolution of all shareholder complaints other than complaints asserting a cause of action arising under the Securities Act, and that the U.S. federal district courts will be the exclusive forum for the resolution of any shareholder complaint asserting a cause of action arising under the Securities Act.

Our articles of association to be effective in connection with the closing of this offering will provide that the courts of England and Wales will be the exclusive forum for resolving all shareholder complaints other than shareholder complaints asserting a cause of action arising under the Securities Act, and that the U.S. federal district courts will be the exclusive forum for resolving any shareholder complaint asserting a cause of action arising under the Securities Act, including applicable claims arising out of this offering. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits. If a court were to find either choice of forum provision contained in our articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our results of operations and financial condition.

There has been no prior public market for our ordinary shares and an active, liquid trading market for our ordinary shares may not develop.

Prior to this offering, there has not been a public market for our ordinary shares. We cannot assure you that an active trading market will develop after this offering or how active and liquid that market may become.

 

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Although we have applied to have our ordinary shares approved for listing on a stock exchange, we do not know whether third parties will find our ordinary shares to be attractive or whether firms will be interested in making a market in our ordinary shares. If an active and liquid trading market does not develop, you may have difficulty selling any of our ordinary shares that you purchase. The initial public offering price for the shares will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our ordinary shares may decline below the initial offering price, and you may not be able to sell your ordinary shares at or above the price you paid in this offering, or at all, and may suffer a loss on your investment.

The market price of our ordinary shares may fluctuate significantly following the offering, our ordinary shares may trade at prices below the initial public offering price, and you could lose all or part of your investment as a result.

The initial public offering price of our ordinary shares has been determined by negotiation between us and the representatives of the underwriters based on a number of factors as further described under “Underwriters” and may not be indicative of prices that will prevail in the open market following completion of this offering. You may not be able to resell your shares at or above the initial public offering price due to a number of factors such as those listed in “—Risks Related to Our Business” and the following, some of which are beyond our control:

 

    quarterly variations in our results of operations;

 

    results of operations that vary from the expectations of securities analysts and investors;

 

    results of operations that vary from those of our competitors;

 

    changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

 

    strategic actions by us or our competitors;

 

    announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;

 

    changes in business or regulatory conditions;

 

    investor perceptions or the investment opportunity associated with our ordinary shares relative to other investment alternatives;

 

    the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

    guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

 

    changes in accounting principles;

 

    announcements by third parties or governmental entities of significant claims or proceedings against us;

 

    a default under the agreements governing our indebtedness;

 

    future sales of our ordinary shares by us, directors, executives and significant shareholders;

 

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    changes in domestic and international economic and political conditions and regionally in our markets; and

 

    other events or factors, including those resulting from natural disasters, war, acts of terrorism or responses to these events.

Furthermore, the stock market has from time to time experienced extreme volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our ordinary shares, regardless of our actual operating performance. As a result, our ordinary shares may trade at a price significantly below the initial public offering price.

In the past, following periods of market volatility, shareholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

If we or our existing investors sell additional ordinary shares after this offering, the market price of our ordinary shares could decline.

The market price of our ordinary shares could decline as a result of sales of a large number of ordinary shares in the market after this offering, or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon the completion of this offering, we will have 198,209,294 million ordinary shares outstanding, or 204,959,294 million shares if the underwriters’ option to purchase additional ordinary shares is exercised in full. Of these outstanding ordinary shares, we expect all of the ordinary shares sold in this offering will be freely tradable in the public market. We expect that all of our ordinary shares outstanding prior to the closing of this offering will be restricted securities as defined in Rule 144 under the Securities Act (“Rule 144”) and may be sold by the holders into the public market from time to time in accordance with and subject to Rule 144, including, where applicable, limitation on sales by affiliates under Rule 144.

We, our directors, our executive officers and the Principal Shareholders have agreed not to sell or transfer any ordinary shares or securities convertible into, exchangeable for, exercisable for, or repayable with ordinary shares, for 180 days after the date of this prospectus without first obtaining the written consent of Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC. Additionally, the remaining holders of all of our ordinary shares or securities convertible into, exchangeable for, exercisable for, or repayable with ordinary shares, have agreed to substantially similar restrictions contained in their existing management stockholders’ agreements with us.

We expect to enter into a new registration rights agreement with the Principal Shareholders and certain members of our management and our board of directors, which will provide the signatories thereto the right, under certain circumstances, to require us to register their ordinary shares under the Securities Act for sale into the public markets. See the information under the heading “Certain Relationships and Related Party Transactions—Registration Rights Agreement” for a more detailed description of the registration rights that will be provided to the signatories thereto.

Upon the completion of this offering, we will have 3,343,967 shares and 1,537,662 shares issuable upon the exercise of outstanding options that vest on time-based and performance-based criteria, respectively, 8,357,725 and 2,470,000 issuable upon vesting of RSUs that vest on time-based and performance-based criteria, respectively, and 10 million shares reserved for future grant under our equity incentive plans. Shares acquired upon the exercise of vested options or RSUs under our equity incentive plans may be sold by holders into the public market from time to

 

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time, in accordance with and subject to limitation on sales by affiliates under Rule 144. Sales of a substantial number of ordinary shares following the vesting of outstanding equity options or RSUs could cause the market price of our ordinary shares to decline.

Future offerings of debt or equity securities by us may adversely affect the market price of our ordinary shares.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional ordinary shares or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity or preferred shares. Future acquisitions could require substantial additional capital in excess of cash from operations. We would expect to finance any future acquisitions through a combination of additional issuances of equity, corporate indebtedness, asset-backed acquisition financing and/or cash from operations.

Issuing additional ordinary shares or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing shareholders or reduce the market price of our ordinary shares or both. Upon liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our ordinary shares. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our ordinary shares. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. Thus, holders of our ordinary shares bear the risk that our future offerings may reduce the market price of our ordinary shares and dilute their shareholdings in us.

Because we do not currently intend to pay cash dividends on our ordinary shares for the foreseeable future, you may not receive any return on investment unless you sell your ordinary shares for a price greater than that which you paid for it.

We currently intend to retain future earnings, if any, for future operation, expansion and debt repayment and do not intend to pay any cash dividends for the foreseeable future. Under English law, any payment of dividends would be subject to relevant legislation and our articles of association, which provide that all dividends must be approved by our board of directors and, in some cases, our shareholders, and may only be paid from our distributable profits available for the purpose, determined on an unconsolidated basis. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, restrictions imposed by applicable law or the SEC and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our credit agreements. Accordingly, investors must be prepared to rely on sales of their ordinary shares after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our ordinary shares. As a result, you may not receive any return on an investment in our ordinary shares unless you sell our ordinary shares for a price greater than that which you paid for it.

We are a holding company with nominal net worth and will depend on dividends and distributions from our subsidiaries to pay any dividends.

We are a holding company with nominal net worth. We do not have any assets or conduct any business operations other than our investments in our subsidiaries. Our business operations are conducted primarily out of our indirect operating subsidiary, DTZ Worldwide Limited. As a result, our ability to pay dividends, if any, will be

 

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dependent upon cash dividends and distributions or other transfers from our subsidiaries. Payments to us by our subsidiaries will be contingent upon their respective earnings and subject to any limitations on the ability of such entities to make payments or other distributions to us. See “—Risks Related to our Business—Our credit agreements impose operating and financial restrictions on us, and in the event of a default, all of our borrowings would become immediately due and payable” for additional information regarding the limitations currently imposed by our credit agreements. In addition, our subsidiaries, including our indirect operating subsidiary, DTZ Worldwide Limited, are separate and distinct legal entities and have no obligation to make any funds available to us.

You will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

Prior investors have paid substantially less per share of our ordinary shares than the price in this offering. The initial public offering price of our ordinary shares is substantially higher than the net tangible book deficit per share of our outstanding ordinary shares prior to completion of the offering. Based on our historical adjusted net tangible book deficit per share as of March 31, 2018 of $17.53 per ordinary share and upon the issuance and sale of 45,000,000 ordinary shares by us at an assumed initial public offering price of $17.00 per share (the midpoint of the price range indicated on the cover of this prospectus), if you purchase our ordinary shares in this offering, you will pay more for your shares than the amounts paid by our existing shareholders for their shares and you will suffer immediate dilution of approximately $26.80 per share in net tangible book value, representing the difference between our pro forma net tangible book deficit per share after giving effect to this offering and the assumed initial public offering price per share. We also have a significant number of outstanding equity options to purchase ordinary shares with exercise prices that are below the estimated initial public offering price of our ordinary shares. To the extent that these equity options are exercised, you will experience further dilution. See “Dilution.”

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

We are not currently required to comply with SEC rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. However, at such time as Section 302 of the Sarbanes-Oxley Act is applicable to us, which we expect to occur immediately following effectiveness of this registration statement, we will be required to evaluate our internal controls over financial reporting. At such time, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act (beginning with the second Form 10-K we are required to file following the completion of this offering). In 2015, we identified material weakness in our internal controls over financial reporting resulting from the combination of DTZ, Cassidy Turley and C&W Group and the combination of legacy accounting practices and systems over a highly compressed period of time, which were remediated during our fiscal year ended December 31, 2016. We continue to identify and implement actions to improve the effectiveness of our internal control over financial reporting and disclosure controls and procedures, but there can be no assurance that such remediation efforts will be successful. Failure to remediate the material weaknesses could have a negative impact on our business and the market for our ordinary shares.

In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a

 

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result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could have a material adverse effect on our business, prospects, results of operations and financial condition.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.

Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a material adverse effect on our business, results of operations and financial condition.

As a public company, we will be subject to the reporting requirements of the Exchange Act, and requirements of the Sarbanes-Oxley Act. These requirements, along with adopting the new accounting standards for revenue recognition and leasing, may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our ordinary share price and trading volume could decline.

The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our ordinary shares would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our ordinary shares or publishes inaccurate or unfavorable research about our business, our ordinary share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our ordinary shares could decrease, which could cause our ordinary share price and trading volume to decline.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance.

These statements can be identified by the fact that they do not relate strictly to historical or current facts, and you can often identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “forecasts,” “shall,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this prospectus are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. You should not place undue reliance on any forward-looking statements and should consider the following factors, as well as the factors discussed elsewhere in this prospectus, including under “Risk Factors” beginning on page 22. We believe that these factors include, but are not limited to:

 

    disruptions in general economic, social and business conditions, particularly in geographies or industry sectors that we or our clients serve;

 

    adverse developments in the credit markets;

 

    our ability to compete globally, or in local geographic markets or service lines that are material to us, and the extent to which further industry consolidation, fragmentation or innovation could lead to significant future competition;

 

    social, political and economic risks in different countries as well as foreign currency volatility;

 

    our ability to retain our senior management and attract and retain qualified and experienced employees;

 

    our reliance on our Principal Shareholders;

 

    the inability of our acquisitions to perform as expected and the unavailability of similar future opportunities;

 

    perceptions of our brand and reputation in the marketplace and our ability to appropriately address actual or perceived conflicts of interest;

 

    the operating and financial restrictions that our credit agreements impose on us and the possibility that in an event of default all of our borrowings may become immediately due and payable;

 

    the substantial amount of our indebtedness, our ability and the ability of our subsidiaries to incur substantially more debt and our ability to generate cash to service our indebtedness;

 

    the possibility we may face financial liabilities and/or damage to our reputation as a result of litigation;

 

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our dependence on long-term client relationships and on revenue received for services under various service agreements;

 

   

the concentration of business with corporate clients;

 

   

the seasonality of significant portions of our revenue and cash flow;

 

   

our ability to execute information technology strategies, maintain the security of our information and technology networks and avoid or minimize the effect of an interruption or failure of our information technology, communications systems or data services;

 

   

the possibility that infrastructure disruptions may disrupt our ability to manage real estate for clients;

 

   

the possibility that our goodwill and other intangible assets could become impaired;

 

   

our ability to comply with new laws or regulations and changes in existing laws or regulations and to make correct determinations in complex tax regimes;

 

   

our ability to execute on our strategy for operational efficiency successfully;

 

   

the possibility we may be subject to environmental liability as a result of our role as a property or facility manager or developer of real estate;

 

   

our expectation to be a “controlled company” within the meaning of the NYSE corporate governance standards, which would allow us to qualify for exemptions from certain corporate governance requirements;

 

   

the fact that the Principal Shareholders will retain significant influence over us and key decisions about our business following the offering that could limit other shareholders’ ability to influence the outcome of matters submitted to shareholders for a vote;

 

   

the fact that certain of our shareholders have the right to engage or invest in the same or similar businesses as us;

 

   

the possibility that the rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation organized in Delaware;

 

   

the possibility that U.S. investors may have difficulty enforcing civil liabilities against our company, our directors or members of senior management and the experts named in this prospectus;

 

   

the possibility that English law and provisions in our articles of association may have anti-takeover effects that could discourage an acquisition of us by others and may prevent attempts by our shareholders to replace or remove our current management;

 

   

the possibility that provisions in the U.K. City Code on Takeovers and Mergers may have anti-takeover effects that could discourage an acquisition of us by others;

 

   

the possibility that given our status as a public limited company incorporated in England and Wales, certain capital structure decisions will require shareholder approval, which may limit our flexibility to manage our capital structure;

 

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the possibility that transfers of shares in Cushman & Wakefield plc outside DTC may be subject to stamp duty or stamp duty reserve tax in the U.K., which would increase the cost of dealing in shares in Cushman & Wakefield plc;

 

   

the fact that our articles of association to be effective in connection with the closing of this offering will provide that the courts of England and Wales will be the exclusive forum for the resolution of all shareholder complaints other than complaints asserting a cause of action arising under the Securities Act, and that the U.S. federal district courts will be the exclusive forum for the resolution of any shareholder complaint asserting a cause of action arising under the Securities Act;

 

   

the fact that there has been no prior public market for our ordinary shares and an active, liquid trading market for our ordinary shares may not develop;

 

   

the fluctuation of the market price of our ordinary shares, and the impact on the market price of our ordinary shares of the possibility that we or our existing investors may sell additional ordinary shares after this offering or that we may attempt future offerings of debt or equity securities;

 

   

the fact that we do not currently anticipate paying any dividends in the foreseeable future;

 

   

the fact that we are a holding company with nominal net worth and will depend on dividends and distributions from our subsidiaries to pay any dividends;

 

   

the fact that you will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering;

 

   

the fact that our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, and the possibility that the requirements of being a public company may strain our resources and distract our management; and

 

   

the possibility that securities or industry analysts may not publish research or may publish inaccurate or unfavorable research about our business.

The factors identified above should not be construed as exhaustive list of factors that could affect our future results, and should be read in conjunction with the other cautionary statements that are included in this prospectus. The forward-looking statements made in this prospectus are made only as of the date of this prospectus. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision to purchase our ordinary shares. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

 

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of 45,000,000 ordinary shares offered by us will be approximately $719.3 million, or approximately $828.3 million if the underwriters exercise their option to purchase additional shares in full (in each case, at an assumed initial public offering price of $17.00 per ordinary share, the midpoint of the price range set forth on the cover of this prospectus), after deducting underwriting discounts and estimated offering expenses payable by us of approximately $45.8 million.

We intend to use the net proceeds from this offering as follows:

 

    approximately $470.0 million to reduce outstanding indebtedness, in particular to repay our Second Lien Loan, which matures on November 4, 2022 and had a weighted average effective interest rate of 8.87% as of December 31, 2017;

 

    approximately $130.0 million to repay the outstanding amount of the Cassidy Turley deferred payment obligation;

 

    approximately $11.9 million to terminate our management services agreement; and

 

    approximately $107.4 million for general corporate purposes.

A $1.00 increase (decrease) in the assumed initial public offering price of $17.00 (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) our estimated net proceeds to us from this offering by $42.8 million, assuming the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a change in the number of ordinary shares we sell would increase or decrease our net proceeds. We believe that our intended use of proceeds would not be affected by changes in either our initial public offering price or the number of ordinary shares we sell.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our share capital. We do not expect to pay dividends on our ordinary shares for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used for the operation and expansion of our business.

Under English law, any payment of dividends would be subject to relevant legislation and our articles of association, which provide that all dividends must be approved by our board of directors and, in some cases, our shareholders, and may only be paid from our distributable profits available for the purpose, determined on an unconsolidated basis. Future cash dividends, if any, will be at the discretion of our board of directors and will depend upon, among other things, our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors the board of directors may deem relevant. The timing and amount of any future dividend payments will be at the discretion of our board of directors. See “Risk Factors—Risks Related to this Offering and Ownership of Our Ordinary Shares—Because we do not currently intend to pay cash dividends on our ordinary shares for the foreseeable future, you may not receive any return on investment unless you sell your ordinary shares for a price greater than that which you paid for it.”

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of March 31, 2018, on:

 

    an actual basis; and

 

    an as adjusted basis to give effect to this offering and the application of the net proceeds of this offering as described under “Use of Proceeds.”

You should read this table together with the information included elsewhere in this prospectus, including “Summary—Summary Historical Consolidated Financial and Other Data,” “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Certain Indebtedness” and our Consolidated Financial Statements and related notes thereto.

 

     As of March 31, 2018  
    (in millions, except per share data)    Actual      As Adjusted

Cash and cash equivalents

    $ 438.7        $ 547.2  
  

 

 

    

 

 

 

Long-term debt (including current portion):

     

First Lien Loan, as amended, net of unamortized discount and issuance costs of $43.7 million

    $ 2,585.2        $ 2,585.2  

Second Lien Loan, as amended, net of unamortized discount and issuance costs of $9.6 million

     460.4         —    

Capital lease liabilities

     15.1         15.1  

Notes payable to former shareholders

     1.4         1.4  
  

 

 

    

 

 

 

Total long-term debt

    $             3,062.1        $ 2,601.7  
  

 

 

    

 

 

 

Equity:

     

Ordinary shares, nominal value $0.10 per share, 145.6 shares issued and outstanding (actual) and 190.6 shares issued and outstanding (as adjusted)

     14.6         19.1  

Additional paid-in capital

     1,755.7         2,470.5  

Accumulated deficit

     (1,221.3)        (1,261.2

Accumulated other comprehensive income

     (63.4)        (63.4
  

 

 

    

 

 

 

Total equity attributable to the Company

     485.6         1,165.0  
  

 

 

    

 

 

 

Total capitalization

    $ 3,547.7        $ 3,766.7  
  

 

 

    

 

 

 

 

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DILUTION

If you invest in our ordinary shares, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our ordinary shares in this offering and the pro forma net tangible book value per share of our ordinary shares after this offering. Dilution results from the fact that the per share offering price of our ordinary shares is substantially in excess of the net tangible book value per share attributable to the existing equity holders. Net tangible book value per share represents the amount of temporary equity and shareholders’ equity excluding intangible assets, divided by the number of ordinary shares outstanding at that date.

Our historical net tangible book value as of March 31, 2018 was $(2,552.5) million, or approximately $(17.54) per ordinary share (assuming 145,560,000 ordinary shares outstanding).

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of ordinary shares in this offering and the pro forma net tangible book value per ordinary share immediately after completion of this offering. Investors participating in this offering will incur immediate and substantial dilution. After giving effect to our sale of 45,000,000 ordinary shares in this offering at an assumed initial public offering price of $17.00 per share, the midpoint of the price range set forth on the cover of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of March 31, 2018 would have been approximately $(1,873.1) million or approximately $(9.83) per share. This amount represents an immediate increase in pro forma net tangible book value of $7.71 per share to existing shareholders and an immediate dilution in pro forma net tangible book value of $26.83 per share to purchasers of ordinary shares in this offering, as illustrated in the following table.

 

Assumed initial public offering price per share

     $ 17.00  

Historical net tangible book value per share as of March 31, 2018

     $ (17.54

Increase per share attributable to new investors

     $ 7.71  
   

 

 

 

Pro forma net tangible book value per share after giving effect to this offering

     $ (9.83
   

 

 

 

Dilution in pro forma net tangible book value per share to new investors

     $ 26.83  
   

 

 

 

A $1.00 increase or decrease in the assumed initial public offering price of $17.00 per share would increase or decrease, as applicable, our pro forma net tangible book value by approximately $42.80 million or approximately $0.22 per share, and the dilution in the pro forma net tangible book value per share to investors in this offering by approximately $(0.23) per share, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses. This pro forma information is illustrative only, and following the completion of this offering, will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

The following table summarizes, as of March 31, 2018, on the pro forma basis described above, the differences between existing shareholders and new investors with respect to the number of ordinary shares purchased from us, the total consideration paid and the average price per ordinary share paid by existing shareholders. The calculation with respect to shares purchased by new investors in this offering reflects the issuance by us of 45,000,000 of our ordinary shares in this offering at an assumed initial public offering price of $17.00 per share, the midpoint of the range set forth on the cover of this prospectus, before deducting the underwriting discounts and commissions and estimated offering expenses.

 

     Shares
Purchased
            Total
Consideration

Amount
            Average
Price Per
Share
 

(in millions, except per share data)

   Number      Percent         Percent     

Existing shareholders

     145.6        76%      $ 1,623.4        68%      $ 11.15  

New investors

     45.0        24%      $ 765.0        32%      $ 17.00  

Total

     190.6        100%      $ 2,388.4        100%      $ 12.53  

 

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If the underwriters exercise their option to purchase additional shares in full from us, the number of ordinary shares held by new investors will increase to 51,750,000, or 26% of the total number of our ordinary shares outstanding after this offering.

The discussion and table above assume no exercise of options outstanding or vesting of RSUs and no issuance of shares reserved for issuance under our equity incentive plans. As of July 23, 2018, there were an aggregate of 10,000,000 ordinary shares reserved for future issuance under the equity incentive plans.

The discussion and table above also excludes the shares outstanding with respect to the deferred payment obligation related to the acquisition of Cassidy Turley, which are also excluded from the outstanding share calculations for accounting purposes.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The selected financial data presented in the table below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the related notes included elsewhere in this prospectus. The selected historical consolidated statements of operations data for the years ended December 31, 2017, 2016 and 2015 and selected historical consolidated balance sheet data as of December 31, 2017 and 2016 has been derived from our audited Consolidated Financial Statements included elsewhere in this prospectus. The selected historical consolidated statement of operations data for the three months ended March 31, 2018 and selected historical consolidated balance sheet data as of March 31, 2018 has been derived from our unaudited interim Condensed Consolidated Financial Statements included elsewhere in this prospectus. The selected historical consolidated balance sheet data as of December 31, 2015 and historical consolidated statements of operations data for the period from November 5, 2014 to December 31, 2014 (Successor) have been derived from our audited Consolidated Financial Statements not included in this prospectus. The selected historical consolidated statements of operations data for the period of July 1, 2014 to November 4, 2014 (Predecessor) has been derived from our audited Combined Consolidated Financial Statements not included this prospectus. The selected historical Combined Consolidated statements of operations and balance sheet data and for the periods ended June 30, 2014 and 2013 (Predecessor) have been derived from our Combined Consolidated Financial Statements not in this prospectus.

On November 5, 2014, a private equity consortium comprising TPG, PAG and OTPP, our Principal Shareholders, acquired DTZ. As a result of DTZ’s acquisition and resulting change in control and changes due to the impact of acquisition accounting, we are required to present separately the operating results for the Predecessor and Successor. We refer to the period through November 4, 2014 as the “Predecessor Period,” and the Combined Consolidated Financial Statements for that period include the accounts of the Predecessor. We refer to the period from November 5, 2014 as the “Successor Period,” and the Consolidated Financial Statements for that period include the accounts of the Successor. Due to the change in control and changes due to acquisition accounting, the Successor Period may not be comparable to the Predecessor Period. On July 13, 2015, the Company’s board of directors approved a change in fiscal year end from June 30 to December 31, effective with the year-end December 31, 2014. Unless otherwise noted, all references to “years” in this prospectus refer to the twelve-month period which ends on December 31 of each year. On December 31, 2014, we acquired Cassidy Turley. Our selected financial data beginning December 31, 2014 also includes Cassidy Turley’s selected financial data. On September 1, 2015, we acquired the C&W Group. Our selected financial data beginning September 1, 2015 also includes the C&W Group’s selected financial data.

On July 6, 2018, we completed the reorganization of our company through the Share Exchange and on July 19, 2018, we completed the Re-registration. Prior to the Share Exchange, our business was conducted by DTZ Jersey Holdings Limited and its consolidated subsidiaries. Following the Share Exchange and before the Re-registration, our business was conducted by Cushman & Wakefield Limited and its consolidated subsidiaries. Following the Re-registration, our business is conducted by Cushman & Wakefield plc and its consolidated subsidiaries. On July 20, 2018, the Company undertook the Share Consolidation, which resulted in a proportional decrease in the number of ordinary shares outstanding as well as corresponding adjustments to outstanding options and RSUs.

 

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The following information should be read together with “Risk Factors,” “Use of Proceeds,” “Capitalization,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated and combined Consolidated Financial Statements and related notes included elsewhere in this prospectus. Historical results are not necessarily indicative of the results to be expected in the future.

 

Statement of Operations
Data:
  Successor     Predecessor  
 
(in millions, except for per
share data and share data)
  Three Months
Ended March 31,
    Year Ended December 31,     Period from
November 5,
2014 to
December 31,
2014
    Period from
July 1, 2014
to
November 4,
2014
    Fiscal Year Ended  
  2018     2017     2017     2016     2015         June 30,
2014
    June 30,
2013
 
 

Revenue

  $  1,767.7       $  1,461.3       $ 6,923.9       $ 6,215.7       $ 4,193.2       $ 407.7       $       814.2       $       2,642.3     $       2,457.7  

Operating (loss) income

  $ (80.7)      $ (120.2)      $ (170.2)      $ (313.4)      $ (410.4)      $ (57.7)      $ 1.7       $ 86.4     $ 53.2  
Net (loss) income attributable to the Company   $ (92.0)      $ (119.7)      $ (220.5)      $ (449.1)      $ (473.7)      $ (21.8)      $ 0.4       $ 58.4     $ 27.4  
 
Net loss per Share, Basic and Diluted (a):                  

Basic

  $ (0.63)     $ (0.84)     $ (1.53)     $ (3.18)     $ (5.46)     $ (0.44)        

Diluted

  $ (0.63)     $ (0.84)     $ (1.53)     $ (3.18)     $ (5.46)     $ (0.44)        

Pro forma basic (b)

  $ (0.43)       $ (0.98)              

Pro forma diluted (b)

  $ (0.43)       $ (0.98)              
 
Weighted Average Shares Outstanding (in thousands)                  

Basic

    145,277.3         143,084.7         143,935.0         141,431.6         86,816.2           49,969.5          

Diluted

    145,277.3         143,084.7         143,935.0         141,431.6         86,816.2         49,969.5          

Pro forma basic (b)

    181,273.2           179,930.9                

Pro forma diluted (b)

    181,273.2           179,930.9                
 
Balance sheet data (at period end):                  

Total assets

  $ 5,935.0         $ 5,797.9       $ 5,681.9       $ 5,442.2       $ 2,407.2         $ 1,674.0     $ 1,574.4  

Total debt

  $ 3,066.6         $ 2,843.5       $ 2,660.1       $ 2,328.7       $ 931.1         $ 279.1     $ 414.5  

 

Other Historical Data:   Three Months
Ended March 31,
    Year Ended December 31,  
(in millions)   2018     2017     2017     2016     2015  

Americas Adjusted EBITDA

  $               62.5       $               35.0       $                     344.6     $                     311.6     $                     217.1  

EMEA Adjusted EBITDA

    (8.6)        (12.8)        108.8       90.8       68.0  

APAC Adjusted EBITDA

    20.9         6.9         75.1       72.4       50.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $               74.8       $               29.1       $ 528.5     $ 474.8     $ 335.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a) Prior to our acquisition by the Principal Shareholders, we operated as a part of UGL Limited and our combined consolidated financial information is derived from the Consolidated Financial Statements and accounting records of UGL Limited. Therefore, we did not have an existing share structure in place at that time and presentation of earnings per share for those periods prior to our acquisition on November 5, 2014 would not be meaningful to an investor.
  (b) 

The calculation of unaudited basic and diluted pro forma Net loss per share reflects certain pro forma adjustments in accordance with Article 11 of Regulation S-X. Unaudited basic and diluted pro forma Net income per ordinary share assumes that $470.0 million of the proceeds of the proposed offering were used to reduce outstanding indebtedness, in particular to repay our Second Lien Loan (as defined in “Description of Certain Indebtedness”), and includes a pro forma adjustment to reflect the elimination of interest expense in the amount of $11.1 million and $37.5 million related to debt repaid for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively, assuming that such proceeds and repayment occurred as of the beginning of the year. Unaudited basic and diluted pro forma Net income per ordinary share also assumes that $11.9 million of the proceeds of the proposed offering were used to make a one-time payment to TPG and PAG to terminate our management services agreement, and includes a pro forma adjustment to

 

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  reflect the elimination of management advisory services fee expense in the amount of $1.2 million and $4.6 million for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively. Unaudited basic and diluted pro forma Net income per ordinary share also assumes approximately $130.0 million was used to repay the outstanding amount of the cash-settled portion of the Cassidy Turley deferred payment obligation, and includes pro forma adjustments to reflect (1) the elimination of the expense associated with the Cassidy Turley deferred payment obligation in the amount of $4.7 million and $20.8 million for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively; and (2) the elimination of the accrued interest expense incurred in connection with accrued portion of the obligation in the amount of $1.3 million and $5.3 million for the three months end March 31, 2018 and the year ended December 31, 2017, respectively. The number of shares used for purposes of pro forma per share data reflects the number of shares to be issued in the offering whose proceeds were used to (1) repay our Second Lien Loan, (2) make a one-time payment to TPG and PAG to terminate our management services agreement, and (3) repay the outstanding amount of the Cassidy Turley deferred payment obligation (assuming pricing at the midpoint of the price range set forth on the cover of this prospectus). The table below sets forth the computation of the Company’s unaudited Pro forma basic and diluted pro forma net loss per share:

 

Pro forma net loss per share:

                       
(in millions, except per share data)   

Three Months Ended

March 31, 2018

     Year Ended December 31, 2017  
          Basic                   Diluted                     Basic                   Diluted        

Net loss

   $              (92.0)      $              (92.0)      $                (220.5)      $                (220.5)  

Pro forma adjustments:

                       

Net interest expense, net of tax

        8.8            8.8            24.4            24.4   

Management advisory services fee, net of tax

        0.9            0.9            3.0            3.0   

Cassidy Turley deferred payment obligation, net of tax

        3.7            3.7            13.5            13.5   

Accrued interest on Cassidy Turley deferred payment obligation, net of tax

        1.0            1.0            3.4            3.4   
     

 

 

       

 

 

       

 

 

       

 

 

 

Pro forma net loss

   $      (77.6)      $      (77.6)      $        (176.2)      $        (176.2

Weighted average ordinary shares outstanding

        145,277.3            145,277.3            143,935.0            143,935.0   
Adjustment to weighted average ordinary shares outstanding related to the offering         35,995.9            35,995.9            35,995.9            35,995.9   

Pro forma weighted average ordinary shares outstanding(1)

        181,273.2            181,273.2            179,930.9            179,930.9   

Pro forma net loss per share

   $      (0.43)      $      (0.43)      $        (0.98)      $        (0.98)  

 

  (1) Excludes impact of 9.0 million ordinary shares offered whose proceeds will be used for general corporate purposes. If all 45 million ordinary shares to be issued in this offering were reflected in the calculation above unaudited basic and diluted pro forma Net income per ordinary share as adjusted would be $(0.41) and $(0.94) for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and related information included elsewhere in this prospectus.

The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may materially differ from those discussed in forward-looking statements. See the “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this prospectus.

Cushman & Wakefield is a top three global commercial real estate services firm, built on a trusted brand and backed by approximately 48,000 employees and serving the world’s real estate owners and occupiers through a scalable platform. We operate across approximately 400 offices in 70 countries, managing over 3.5 billion square feet of commercial real estate space on behalf of institutional, corporate and private clients. Our business is focused on meeting the increasing demands of our clients across multiple service lines including Property, facilities and project management, Leasing, Capital markets, and Valuation and other services.

Critical Accounting Policies

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP” or “GAAP”), which require us to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and on other factors that we believe to be reasonable. Actual results may differ from those estimates. We review these estimates on a periodic basis to ensure reasonableness. Although actual amounts may differ from such estimated amounts, we believe such differences are not likely to be material. For additional detail regarding our critical accounting policies and estimates discussed below, see Note 2: Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. There have been no material changes to these policies as of March 31, 2018 with the exception of the Company’s implementation of Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (together with all subsequent amendments, “Topic 606”) discussed further below.

Revenue Recognition

The Company principally earns revenue from Property, facilities and project management, Leasing, Capital markets and Valuation and other.

The judgments involved in revenue recognition include understanding the complex terms of agreements and determining the appropriate time and method to recognize revenue for each transaction based on such terms. The timing of revenue recognition could vary if different judgments are made.

As of January 1, 2018, the Company adopted Topic 606, which replaced most existing revenue recognition guidance under U.S. GAAP. The core principle of Topic 606 requires companies to reevaluate when revenue is recorded on a transaction based upon newly defined criteria, either at a point in time or over time as goods or services are delivered. Topic 606 requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates, and changes in those estimates. For further information regarding the impact of the adoption of this standard on the unaudited interim Condensed Consolidated Financial Statements and related disclosures, as well as significant judgments performed by the Company when applying Topic 606, refer to Note 2: Summary of Significant Accounting Policies from the Notes to the audited Consolidated Financial Statements for the year ended December 31, 2017 and Note 5: Revenue from Notes to the unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2018.

 

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Business Combinations, Goodwill and Indefinite-Lived Intangible Assets

The Company has grown, in part, through a series of acquisitions. See Note 1: Organization and Business Overview of the Notes to Consolidated Financial Statements. We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all of the assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, be recorded at their respective fair values as of the acquisition date. Determination of the fair values of the assets and liabilities acquired requires estimates and the use of valuation techniques when market values are not readily available.

The Company recorded significant goodwill and intangible assets resulting from these acquisitions. Goodwill represents the excess of purchase consideration over the fair value of the net assets of businesses acquired. In determining the fair values of assets and liabilities acquired in a business combination, we use a variety of valuation methods including the market approach, income approach, depreciated replacement cost and market values (where available).

Assumptions must often be made in determining fair values, particularly where observable market values do not exist. Assumptions may include discount rates, growth rates, cost of capital, royalty rates, tax rates and remaining useful lives. These assumptions can have a significant impact on the value of identifiable assets and accordingly can impact the value of goodwill recorded. Different assumptions could result in different values being attributed to assets as well as liabilities and may impact our Consolidated Financial Statements.

Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they may be impaired. The initial impairment evaluation of goodwill is a qualitative assessment and is performed to assess whether the fair value of a reporting unit (“RU”) is less than its carrying amount and only proceeds to the quantitative impairment test if it is more likely than not that the fair value of the RU is less than its carrying amount. If the Company determines the quantitative impairment test is required, the estimated fair value of the RU is compared to its carrying amount, including goodwill. If the estimated fair value of a RU exceeds its carrying value, goodwill is not considered to be impaired. If the carrying amount exceeds the estimated fair value, an impairment loss is recognized equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill.

The Company records an impairment loss for other definite and indefinite-lived intangible assets if impairment triggers exist and the fair value of the asset is less than the asset’s carrying amount. For the year ended December 31, 2015, an impairment charge of $143.8 million was recognized on the consolidated statements of operations related to the DTZ trade name intangible asset. For a detailed discussion of goodwill and indefinite-lived intangible assets, see Note 7: Goodwill and Other Intangible Assets of the Notes to Consolidated Financial Statements.

Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with GAAP. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the new rate is enacted. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized in the future.

Accounting for tax positions requires judgments, including estimating reserves for potential uncertainties. We also assess our ability to utilize tax attributes, including those in the form of net operating loss carryforwards,

 

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for which the benefits have already been reflected in the financial statements. We do not record valuation allowances for deferred tax assets that we believe will be realized in future periods. While we believe the resulting tax balances as of December 31, 2017 and 2016 are appropriately accounted for in accordance with GAAP, as applicable, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to our Consolidated Financial Statements and such adjustments could be material.

In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

On December 22, 2017, H.R. 1, the Tax Cuts and Jobs Act (“the Tax Act”) was enacted. The Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. federal corporate rate from 35% to 21% effective January 1, 2018 while also implementing a new tax system on non-US earnings and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. US GAAP requires the impact of tax legislation to be recognized in the period in which the law was enacted. Some amounts recorded as a discrete item in the Benefit from income taxes for the year ended December 31, 2017 to account for the changes as a result of the Tax Act were recorded as provisional amounts and the Company’s best estimates. Any adjustments recorded to the provisional amounts through the fourth quarter of 2018 will be included in the statement of operations as an adjustment to income tax expense. The provisional amounts incorporate assumptions made based upon the Company’s current interpretation of the Tax Act and may change as the Company receives additional clarification and implementation guidance or implements structure changes.

The provision for income taxes comprises current and deferred income tax expense and is recognized in the Consolidated Financial Statements. To the extent that the income taxes are for items recognized directly in equity, the related income tax effects are recognized in equity. The Company provides for the effects of income taxes on interim financial statements based on estimates of the effective tax rate for the full year, which is based on forecasted income by country and expected enacted tax rates. For additional discussion on income taxes, see Note 13: Income Taxes of the Notes to Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

See Recently Issued Accounting Pronouncements section within Note 2: Summary of Significant Accounting Policies from the Notes to the audited Consolidated Financial Statements for the year ended December 31, 2017 and Note 2: New Accounting Standards from the Notes to the unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2018.

Items Affecting Comparability

When reading our financial statements and the information included in this prospectus, you should consider that we have experienced, and continue to experience, several material trends and uncertainties that have affected our financial condition and results of operations that could affect future performance. We believe that the following material trends and uncertainties are crucial to an understanding of the variability in our historical earnings and cash flows and the potential for continued variability in the future.

Macroeconomic Conditions

Our results of operations are significantly impacted by economic trends, government policies and the global and regional real estate markets. These include the following: overall economic activity; changes in interest rates; the impact of tax and regulatory policies; changes in employment rates; level of commercial construction spend; the cost and availability of credit; and the geopolitical environment.

 

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Compensation is a significant expense and many of our Leasing and Capital markets professionals are paid on a commission and/or bonus basis that is linked to their revenue production or the profitability of their activity. As a result, the negative effect of difficult market conditions on our Fee revenue is partially mitigated by a reduction in our compensation expense. Nevertheless, adverse economic trends could pose significant risks to our operating performance and financial condition.

Acquisitions

Our results include the incremental impact of completed acquisitions from the date of acquisition, which may impact the comparability of our results on a year-over-year basis. Additionally, there is generally an adverse impact on net income for a period of time after the completion of an acquisition driven by transaction-related and integration expenses. We have historically used strategic and in-fill acquisitions to add new service capabilities, to increase our scale within existing capabilities and to expand our presence in new or existing geographic regions globally. We believe that strategic acquisitions will increase revenue, provide cost synergies and generate incremental income in the long term.

Seasonality

A significant portion of our revenue is seasonal, especially for service lines such as Leasing and Capital markets, which impacts the comparison of our financial condition and results of operations on a quarter-by-quarter basis. There is a general focus on completing transactions by calendar year-end with a significant concentration in the last quarter of the calendar year while certain expenses are recognized more evenly throughout the calendar year. Historically, our fee revenue and operating profit tend to be lowest in the first quarter, and highest in the fourth quarter of each year. The Property, facilities and project management service line partially mitigates this intra-year seasonality, owing to the recurring nature of this service line, which generates more stable revenues throughout the year.

Inflation

Our commission and other operating costs tied to revenue are primarily impacted by factors in the commercial real estate market. These factors have the potential to be affected by inflation. Other costs such as wages and costs of goods and services provided by third parties also have the potential to be impacted by inflation. However, we do not believe that inflation has materially impacted our operations.

International Operations

Our business consists of service lines operating in multiple regions inside and outside of the United States. Our international operations expose us to global economic trends as well as foreign government tax, regulatory and policy measures.

Additionally, outside of the U.S., we generate earnings in other currencies and are subject to fluctuations relative to the U.S. dollar (“USD”). As we continue to grow our international operations through acquisitions and organic growth, these currency fluctuations have the potential to positively or adversely affect our operating results measured in USD. It can be difficult to compare period-over-period financial statements when the movement in currencies against the USD does not reflect trends in the local underlying business as reported in its local currency.

In order to assist our investors and improve comparability of results, we present the year-over-year changes in certain of our non-GAAP financial measures, such as Fee revenue and Adjusted EBITDA, in “local” currency, which is calculated by translating results of our foreign operations to USD using a constant USD exchange rate for each underlying currency (i.e., year-over-year changes are presented in local currency assuming constant foreign exchange rates measured against USD). We believe that this provides our management and investors with a better view of comparability and trends in the underlying operating business.

 

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Adoption of New Accounting Standards

On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. Comparative information for prior periods continues to be reported under the accounting standards in effect for those periods.

The most significant effects of the new guidance on the comparability of our results of operations for the three months ended March 31, 2018 include the following:

 

  i. Certain revenues in our Leasing service line are recognized earlier. This resulted in additional Revenue and Fee revenue of $9.7 million for the three months ended March 31, 2018, partially offset by related commissions and tax impacts with no impact to cash flows.

 

  ii. The proportion of facility and property management contracts accounted for on a gross basis increased, resulting in higher Revenue and Cost of services of $119.5 million for the three months ended March 31, 2018, with no impact on Fee revenue, Operating loss, Net loss or the statement of cash flows.

See Note 5: Revenue of the Notes to the unaudited interim Condensed Consolidated Financial Statements for additional information.

Use of Non-GAAP Financial Information

The following measures are considered “non-GAAP financial measures” under SEC guidelines:

 

  i. Fee revenue and Fee-based operating expenses;

 

  ii. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin; and

 

  iii. Local currency.

Our management principally uses these non-GAAP financial measures to evaluate operating performance, develop budgets and forecasts, improve comparability of results and assist our investors in analyzing the underlying performance of our business. These measures are not recognized measurements under GAAP. When analyzing our operating results, investors should use them in addition to, but not as an alternative for, the most directly comparable financial results calculated and presented in accordance with GAAP. Because the Company’s calculation of these non-GAAP financial measures may differ from other companies, our presentation of these measures may not be comparable to similarly titled measures of other companies.

The Company believes that these measures provide a more complete understanding of ongoing operations, enhance comparability of current results to prior periods and may be useful for investors to analyze our financial performance. The measures eliminate the impact of certain items that may obscure trends in the underlying performance of our business. The Company believes that they are useful to investors, for the additional purposes described below.

Fee revenue: The Company believes that investors may find this measure useful to analyze the financial performance of our Property, facilities and project management service line and our business generally. Fee revenue is GAAP revenue excluding costs reimbursable by clients which have substantially no margin, and as such provides greater visibility into the underlying performance of our business.

 

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Additionally, pursuant to business combination accounting rules, certain fee revenues that were deferred by the acquiree are recorded as a receivable on the acquisition date by the Company. Such contingent fee revenues are recorded as acquisition accounting adjustments to reflect the revenue recognition of the acquiree absent the application of acquisition accounting.

Fee-based operating expenses: Consistent with GAAP, reimbursed costs for certain customer contracts are presented on a gross basis (“gross contract costs”) in both revenue and operating expenses. As described above, gross contract costs are excluded from revenue in determining “Fee revenue.” Gross contract costs are similarly excluded from operating expenses in determining “Fee-based operating expenses.” Excluding gross contract costs from Fee-based operating expenses more accurately reflects how we manage our expense base and operating margins and, accordingly, is useful to investors and other external stakeholders for evaluating performance.

Adjusted EBITDA and Adjusted EBITDA margin: We have determined Adjusted EBITDA to be our primary measure of segment profitability. We believe that investors find this measure useful in comparing our operating performance to that of other companies in our industry because these calculations generally eliminate integration and other costs related to acquisitions, stock-based compensation, the deferred payment obligation related to the acquisition of Cassidy Turley and other items. Adjusted EBITDA also excludes the effects of financings, income tax and the non-cash accounting effects of depreciation and intangible asset amortization. Adjusted EBITDA margin, a non-GAAP measure of profitability as a percent of revenue, is calculated by dividing Adjusted EBITDA by Fee revenue.

Local currency: In discussing our results, we refer to percentage changes in local currency. For comparability purposes, such amounts presented on a local currency basis are calculated by translating results of our foreign operations to USD using a constant USD exchange rate for each underlying currency (i.e., year-over-year changes are presented in local currency assuming constant foreign exchange rates measured against USD). Management believes that this methodology provides investors with greater visibility into the performance of our business excluding the effect of foreign currency rate fluctuations.

Pro Forma Financial Information

See “—Pro Forma Financial Information” for further detail on the Company’s use of pro forma financial information for the 2015 period.

 

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Results of Operations

The following table sets forth items derived from our consolidated statements of operations for the three months ended March 31, 2018 and 2017 (in millions):

 

    Three Months
Ended

  March 31, 2018  
    Three Months
Ended

  March 31, 2017  
    % Change
in USD
    % Change in
Local

Currency
 

Revenue:

       

Total revenue

    $               1,767.7       $               1,461.3       21     18

Less: Gross contract costs

    (521.8     (367.8     42     39

Acquisition accounting adjustments

    0.1       10.1       n/     n/
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

    $ 1,246.0       $ 1,103.6       13     10
 

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

       

Property, facilities and project management

    $ 615.0       $ 587.9       5     2

Leasing

    319.9       278.9       15     12

Capital markets

    214.1       146.9       46     43

Valuation and other

    97.0       89.9       8     2
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

    $ 1,246.0       $ 1,103.6       13     10
 

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

       

Cost of services, operating and administrative expenses excluding gross contract costs

    $ 1,246.4       $ 1,150.6       8     6

Gross contract costs

    521.8       367.8       42     39

Depreciation and amortization

    69.8       63.0       11     8

Restructuring, impairment and related charges

    10.4       0.1       n/     n/
 

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    $ 1,848.4       $ 1,581.5       17     14
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

    $ (80.7     $ (120.2     (33 )%      (34 )% 

Adjusted EBITDA

    $ 74.8       $ 29.1       157     158

Adjusted EBITDA Margin

    6%       3%      

Adjusted EBITDA is calculated as follows (in millions):

 

     Three Months
Ended
  March 31, 2018  
    Three Months
Ended
  March 31, 2017  
 

Net loss attributable to the Company

     $ (92.0     $ (119.7

Add/(less):

    

Depreciation and amortization

     69.8       63.0  

Interest expense, net of interest income

     44.4       41.7  

Benefit from income taxes

     (31.7     (41.7

Integration and other costs related to acquisitions

     65.7       62.6  

Stock-based compensation

     6.1       8.1  

Cassidy Turley deferred payment obligation

     10.4       11.1  

Other

     2.1       4.0  
  

 

 

   

 

 

 

Adjusted EBITDA

     $                     74.8       $                     29.1  
  

 

 

   

 

 

 

 

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Below is the reconciliation of total costs and expenses to Fee-based operating expenses (in millions):

 

     Three Months
Ended
  March 31, 2018  
     Three Months
Ended
  March 31, 2017  
 

Total costs and expenses

   $                 1,848.4       $                 1,581.5   

Less: Gross contract costs

     (521.8)        (367.8)  
  

 

 

    

 

 

 

Fee-based operating expenses

   $ 1,326.6       $ 1,213.7   
  

 

 

    

 

 

 

The following table presents a reconciliation of Fee-based operating expenses by segment to Consolidated Fee-based operating expenses (in millions):

 

     Three Months
Ended

  March 31, 2018  
     Three Months
Ended
  March, 31 2017  
 

Fee-based operating expenses:

     

Americas fee-based operating expenses

   $ 787.6       $ 730.7   

EMEA fee-based operating expenses

     173.3         142.2   

APAC fee-based operating expenses

     211.7         202.1   
  

 

 

    

 

 

 

Segment fee-based operating expenses

     1,172.6         1,075.0   

Depreciation and amortization

     69.8         63.0   

Integration and other costs related to acquisitions (1)

     65.6         52.5   

Stock-based compensation

     6.1         8.1   

Cassidy Turley deferred payment obligation

     10.4         11.1   

Other

     2.1         4.0   
  

 

 

    

 

 

 

Fee-based operating expenses

   $                 1,326.6       $                 1,213.7   
  

 

 

    

 

 

 

 

(1)  Represents integration and other costs related to acquisitions, comprised of certain direct and incremental costs resulting from acquisitions and related integration efforts, as well as costs related to our restructuring programs. Excludes the impact of acquisition accounting revenue adjustments as these amounts do not impact operating expenses.

Three months ended March 31, 2018 compared to three months ended March 31, 2017

Revenue

Revenue was $1.8 billion, an increase of $306.4 million or 21%. Gross contract costs, primarily in the Property, facilities and project management service line, increased $154.0 million driven by the $119.5 million impact of the adoption of Topic 606. Foreign currency had a $38.2 million favorable impact on Revenue, driving approximately 3% growth of revenue.

Fee revenue reflected increases in Capital Markets and Leasing. Capital Markets Fee revenue increased $64.1 million or 43%, on a local currency basis, driven by an Americas increase of $44.3 million or 37%, on a local currency basis, and an APAC increase of $18.4 million or more than 200%, on a local currency basis. Leasing Fee revenue increased $33.1 million or 12%, on a local currency basis, driven by an Americas increase of $30.8 million or 14%, on a local currency basis.

Operating expenses

Operating expenses were $1.8 billion, an increase of $266.9 million or 17%. The increase in operating expenses reflected increased cost associated with revenue growth and the $119.5 million increase to gross contract costs resulting from the adoption of ASC 606 discussed above.

 

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Fee-based operating expenses, excluding Depreciation and amortization, integration and other costs related to acquisitions and stock-based compensation, were $1.2 billion, a 6% increase on a local currency basis. The growth in Fee-based operating expenses reflected higher costs in Capital Markets and Leasing associated with Fee revenue growth.

Interest expense

Interest expense, net of interest income increased by $2.7 million, which reflects a one-time charge of $3.4 million related to the March 2018 debt modification.

Benefit from income taxes

The benefit from income taxes was $31.7 million, a decrease of $10.0 million. The decrease was driven by the effect of a lower loss before income taxes partially offset by a discrete tax benefit of $22.2 million related to the Tax Act in the 2018 period. Refer to Note 1: Basis of Presentation of the Notes to the unaudited interim Condensed Consolidated Financial Statements for a further discussion of our effective tax rate.

Net loss and Adjusted EBITDA

Net loss decreased from $119.7 million to $92.0 million for the three months ended March 31, 2018 driven by Fee revenue exceeding the increase in Fee-based operating expenses, partially offset by a lower benefit from income taxes.

Adjusted EBITDA increased by $45.6 million or 158%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses and the $4.3 million impact of the adoption of Topic 606. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 6%, compared to 3% in the prior year.

Segment Operations

We report our operations through the following segments: (1) Americas, (2) Europe, the Middle East and Africa (“EMEA”) and (3) Asia Pacific (“APAC”). The Americas consists of operations located in the United States, Canada and key markets in Latin America. EMEA includes operations in the UK, France, Netherlands and other markets in Europe and the Middle East. APAC includes operations in Australia, Singapore, China and other markets in the Asia Pacific region.

For segment reporting, gross contract costs are excluded from revenue in determining “Fee revenue.” Gross contract costs are excluded from operating expenses in determining “Fee-based operating expenses.” Additionally, our measure of segment results, Adjusted EBITDA, excludes depreciation and amortization, as well as integration and other costs related to acquisitions, stock-based compensation, expense related to the Cassidy Turley deferred payment obligation and other items.

 

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Americas Results

The following table summarizes our results of operations by our Americas operating segment for the three months ended March 31, 2018 and 2017 (in millions):

 

     Three Months
Ended

  March 31,  
2018
    Three Months
Ended

  March 31,  
2017
    % Change
in USD
    %
Change
in Local
Currency
 

Total revenue

     $ 1,206.2       $ 987.2       22     22

Less: Gross contract costs

     (356.3     (231.6     54     54

Acquisition accounting adjustments

     0.1       10.1       n/     n/
  

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

     $ 850.0       $ 765.7       11     11
  

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

        

Property, facilities and project management

     $ 404.2       $ 390.9             3     3

Leasing

     246.0       214.4           15     14

Capital markets

     163.1       118.6           38     37

Valuation and other

     36.7       41.8       (12 )%      (12 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

     $ 850.0       $ 765.7           11         11
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating expenses

     $           1,143.9       $               962.3           19         19

Less: Gross contract costs

     (356.3     (231.6         54         54
  

 

 

   

 

 

   

 

 

   

 

 

 

Total fee-based operating expenses

     $ 787.6       $ 730.7             8           8
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     $ 62.5       $ 35.0       79     78

Adjusted EBITDA Margin

     7%       5%      

Three months ended March 31, 2018 compared to three months ended March 31, 2017

Americas revenue was $1.2 billion and Fee revenue was $850.0 million, increases of $219.0 million and $84.3 million, respectively. The change in revenue includes higher gross contract costs of $87.7 million as a result of the adoption of Topic 606.

Fee revenue increased $83.2 million or 11%, on a local currency basis. The increase in Fee revenue was driven primarily by growth in the Capital markets and Leasing service lines. The adoption of Topic 606 positively impacted fee revenue in the Leasing service line by $9.1 million or 4% on a local currency basis.

Fee-based operating expenses were $787.6 million, an 8% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by higher cost of services associated with Fee revenue growth.

Adjusted EBITDA increased by $27.4 million or 78%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses and the $4.0 million impact of the adoption of Topic 606. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 7%, compared to 5% in the prior year.

 

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EMEA Results

The following table summarizes our results of operations by our EMEA operating segment for the three months ended March 31, 2018 and 2017 (in millions):

 

     Three Months
Ended

  March 31,  
2018
     Three Months
Ended

  March 31,  
2017
     % Change in
USD
     % Change in
Local
Currency
 

Total revenue

   $ 209.2       $ 147.3         42%        25%  

Less: Gross contract costs

     (45.9)        (18.5)            148%        117%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fee revenue

   $ 163.3       $ 128.8         27%        11%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Service lines:

           

Property, facilities and project management

   $ 54.6       $ 38.6         41%        24%  

Leasing

     47.9         40.9         17%        3%  

Capital markets

     23.9         19.6         22%        6%  

Valuation and other

     36.9         29.7         24%        9%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fee revenue

   $ 163.3       $ 128.8         27%        11%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating expenses

   $         219.2       $         160.7         36%        20%  

Less: Gross contract costs

     (45.9)        (18.5)        148%            117%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fee-based operating expenses

   $           173.3       $ 142.2         22%        8%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ (8.6)      $ (12.8)        (33)%        (36)%  

Adjusted EBITDA Margin

     (5)%        (10)%        

Three months ended March 31, 2018 compared to three months ended March 31, 2017

EMEA revenue was $209.2 million and Fee revenue was $163.3 million, increases of $61.9 million and $34.5 million, respectively. The change in revenue includes higher gross contract costs of $24.7 million as a result of the adoption of Topic 606, which had no impact on Fee revenue.

Fee revenue increased by $16.1 million or 11%, on a local currency basis, driven primarily by growth in the Property, facilities and project management and Valuation and other service lines.

Fee-based operating expenses were $173.3 million, an 8% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by higher cost of services associated with Fee revenue growth.

Adjusted EBITDA increased by $4.9 million or 36%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses.

 

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APAC Results

The following table summarizes our results of operations by our APAC operating segment for the three months ended March 31, 2018 and 2017 (in millions):

 

    Three Months
Ended

  March 31, 2018  
    Three Months
Ended

  March 31, 2017  
    % Change in
USD
    % Change in
Local
Currency
 

Total revenue

  $ 352.3     $ 326.8       8%       3%  

Less: Gross contract costs

    (119.6     (117.7     2%       (2)%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

  $ 232.7     $ 209.1       11%       6%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

       

Property, facilities and project management

  $ 156.2     $ 158.4    

 

(1)%

 

    (6)%  

Leasing

    26.0       23.6       10%       4%  

Capital markets

    27.1       8.7       211%       210%  

Valuation and other

    23.4       18.4       27%       20%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

  $ 232.7     $ 209.1       11%       6%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating expenses

  $ 331.3     $ 319.8       4%       (2)%  

Less: Gross contract costs

    (119.6     (117.7     2%       (2)%  
 

 

 

   

 

 

   

 

 

   

 

 

 
Total fee-based operating expenses   $               211.7     $               202.1       5%       6%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 20.9     $ 6.9       203%           178%  

Adjusted EBITDA Margin

    9%       3%      

Three months ended March 31, 2018 compared to three months ended March 31, 2017

APAC revenue was $352.3 million and Fee revenue was $232.7 million, increases of $25.5 million and $23.6 million, respectively. The change in revenue includes higher gross contract costs of $7.1 million as a result of the adoption of Topic 606.

Fee revenue increased by $12.7 million or 6% on a local currency basis. The increase in Fee revenue was driven primarily by growth in the Capital Markets and Valuation and other service lines, partially offset by the Property, facilities and project management service line.

Fee-based operating expenses were $211.7 million, and remained relatively consistent on a local currency basis.

Adjusted EBITDA increased by $13.3 million or 178%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 9% compared to 3% in the prior year.

 

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The following table sets forth items derived from our consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 (in millions):

 

                      % Change in
USD
    % Change in Local
Currency
 
    Year Ended
  December 31,  
2017
    Year Ended
  December 31,  
2016
    Year Ended
  December 31,  
2015
    2017
v
2016
    2016
v
2015
    2017
v
2016
    2016
v
2015
 

Revenue:

             

Total revenue

  $       6,923.9     $       6,215.7     $       4,193.2       11     48     11     51

Less: Gross contract costs

    (1,627.3     (1,406.0     (675.6     16     108     15         112

Acquisition accounting adjustments

    23.2       30.1       99.5       (23)     (70)     (24)     (69)
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

  $ 5,319.8     $ 4,839.8     $ 3,617.1       10     34     10     36
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

             

Property, facilities and project management

  $ 2,488.5     $ 2,190.7     $ 1,877.7       14     17     13     18

Leasing

    1,650.8       1,498.9       1,101.5       10     36     10     38

Capital markets

    740.5       730.8       334.8       1         118     1     124

Valuation and other

    440.0       419.4       303.1       5     38     5     46
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

  $ 5,319.8     $ 4,839.8     $ 3,617.1       10     34     10     36
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

             

Cost of services, operating and administrative expenses excluding gross contract costs

  $ 5,167.7     $ 4,830.4     $ 3,569.3       7     35     7     35

Gross contract costs

    1,627.3       1,406.0       675.6       16     108     15     112

Depreciation and amortization

    270.6       260.6       155.9       4     67     4     72

Restructuring, impairment and related charges

    28.5       32.1       202.8       (11)     (84)     (8)     (73)
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

  $ 7,094.1     $ 6,529.1     $ 4,603.6       9     42     8     45
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  $ (170.2   $ (313.4   $ (410.4     (46)     (24)     (44)     (18)

Adjusted EBITDA

  $ 528.5     $ 474.8     $ 335.9       11     41     9     45

Adjusted EBITDA Margin

    10%       10%       9%          

Adjusted EBITDA is calculated as follows (in millions):

 

     Year Ended
December 31,
2017
  Year Ended
December 31,
2016
  Year Ended
December 31,
2015

Net loss attributable to the Company

   $         (220.5   $         (449.1   $         (473.7

Add/(less):

      

Depreciation and amortization

     270.6       260.6       155.9  

Interest expense, net of interest income

     183.1       171.8       123.1  

Benefit from income taxes

     (120.4     (27.4     (56.3

Integration and other costs related to acquisitions

     326.3       427.5       497.4  

Stock-based compensation

     28.2       40.8       15.4  

Cassidy Turley deferred payment obligation

     44.0       47.6       61.8  

Other

     17.2       3.0       12.3  
  

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

   $ 528.5     $ 474.8     $ 335.9  
  

 

 

 

 

 

 

 

 

 

 

 

Refer to “Summary Historical and Pro Forma Financial Information” for additional detail on items noted above.

 

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Below is the reconciliation of total costs and expenses to Fee-based operating expenses (in millions):

 

     Year Ended
December 31,
2017
  Year Ended
December 31,
2016
  Year ended
December 31,
2015

Total costs and expenses

   $          7,094.1     $          6,529.1     $          4,603.6  

Less: Gross contract costs

     (1,627.3     (1,406.0     (675.6
  

 

 

 

 

 

 

 

 

 

 

 

Fee-based operating expenses

   $ 5,466.8     $ 5,123.1     $ 3,928.0  
  

 

 

 

 

 

 

 

 

 

 

 

The following table presents a reconciliation of Fee-based operating expenses by segment to Consolidated Fee-based operating expenses (in millions):

 

     Year Ended
December 31,
2017
   Year Ended
December 31,
2016
   Year Ended
December 31,
2015

Fee-based operating expenses:

        

Americas fee-based operating expenses

   $ 3,251.7      $ 2,992.4      $ 2,187.0  

EMEA fee-based operating expenses

     688.5        605.9        463.4  

APAC fee-based operating expenses

     863.5        775.4        634.3  
  

 

 

 

  

 

 

 

  

 

 

 

Segment fee-based operating expenses

     4,803.7        4,373.7        3,284.7  

Depreciation and amortization

     270.6        260.6        155.9  

Integration and other costs related to acquisitions (1)

     303.1        397.4        397.9  

Stock-based compensation

     28.2        40.8        15.4  

Cassidy Turley deferred payment obligation

     44.0        47.6        61.8  

Other

     17.2        3.0        12.3  
  

 

 

 

  

 

 

 

  

 

 

 

Fee-based operating expenses

   $              5,466.8      $              5,123.1      $              3,928.0  
  

 

 

 

  

 

 

 

  

 

 

 

 

 

  (1)  Represents integration and other costs related to acquisitions, comprised of certain direct and incremental costs resulting from acquisitions and related integration efforts, as well as costs related to our restructuring programs. Excludes the impact of acquisition accounting revenue adjustments as these amounts do not impact operating expenses.

Year ended December 31, 2017 compared to year ended December 31, 2016

Revenue

Revenue was $6.9 billion, an increase of $708.2 million or 11%, which included an increase in gross contract costs of $221.3 million primarily in the Property, facilities and project management service line. Revenue growth also reflected the year-to-year increases in service line and segment Fee revenue discussed below. Foreign currency had a $44.2 million favorable impact on Revenue, driving approximately 1% growth of revenue.

Fee revenue was $5.3 billion, an increase of $480.0 million. Fee revenue increased $447.7 million or 10%, on a local currency basis. Foreign currency had a $32.2 million favorable impact on Fee revenue, driving approximately 1% growth of Fee revenue.

Fee revenue reflected increases in Property, facilities and project management and Leasing. Property, facilities and project management Fee revenue increased $279.8 million or 13%, on a local currency basis, driven by an Americas increase of $187.5 million or 13%, on a local currency basis, and an APAC increase of

 

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$66.4 million or 12%, on a local currency basis. Leasing Fee revenue increased $143.4 million or 10%, on a local currency basis, driven by an Americas increase of $101.5 million or 9%, on a local currency basis, and an EMEA increase of $23.0 million or 11%, on a local currency basis.

Operating expenses

Operating expenses were $7.1 billion, an increase of $565.0 million or 9%. The increase in operating expenses reflected increased cost associated with revenue growth, including gross contract costs, partially offset by lower integration and other costs related to acquisitions.

Fee-based operating expenses, excluding Depreciation and amortization, integration and other costs related to acquisitions and stock-based compensation, were $4.8 billion, a 9% increase on a local currency basis. The growth in Fee-based operating expenses reflected higher costs in Property, facility and project management and Leasing associated with Fee revenue growth.

Interest expense

Interest expense, net of interest income increased by $11.3 million as a result of higher average annual borrowings. Average annual borrowings increased from $2.5 billion during 2016 to $2.7 billion during 2017 with interest expense as a percentage of average outstanding debt remaining relatively unchanged.

Benefit from income taxes

The benefit from income taxes was $120.4 million, an increase of $93.0 million. The benefit included a discrete tax benefit of $60.9 million related to the Tax Act as well as the impact of valuation allowances and other discrete items. Refer to the Income Tax discussion in the Summary of Critical Accounting Policies and Estimates and Note 13 of the Notes to Consolidated Financial Statements for a further discussion of our effective tax rate.

Net loss and Adjusted EBITDA

Net loss decreased from $449.1 million to $220.5 million in 2017 driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses, lower integration and other costs related to acquisitions and increased benefit from income taxes.

Adjusted EBITDA increased by $44.1 million or 9%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses. Adjusted EBITDA margin, calculated on a Fee revenue basis, was relatively unchanged from 2016 to 2017 at 10%.

Year ended December 31, 2016 compared to year ended December 31, 2015

Revenue

Revenue was $6.2 billion, an increase of $2.0 billion or 48%, including an increase in gross contract costs of $730.4 million, primarily in the Property, facilities and project management service line. The increase in revenue was primarily driven by inclusion of a full year of activity from the 2015 C&W Group merger compared to four months of activity in 2015. Foreign currency had a $34.4 million unfavorable impact on Revenue, driving approximately 1% decline of revenue.

Fee revenue was $4.8 billion, an increase of $1.2 billion. Fee revenue increased by $1.3 billion or 36% on a local currency basis. The increase in Fee revenue was driven primarily by inclusion of a full year of activity from the 2015 C&W Group merger. Foreign currency had a $36.5 million unfavorable impact on Fee revenue, driving approximately 1% decline of Fee revenue.

 

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Operating expenses

Operating expenses were $6.5 billion, an increase of $1.9 billion or 42%. The increase in operating expenses was primarily driven by inclusion of a full year of activity from the 2015 C&W Group merger compared to four months of activity in 2015.

Fee-based operating expenses, excluding Depreciation and amortization, integration and other costs related to acquisitions and stock-based compensation, were $4.4 billion, a 35% increase on a local currency basis. The growth in both operating expenses and Fee-based operating expenses was driven primarily by inclusion of a full year of activity from the C&W Group merger.

Interest expense

Interest expense, net of interest income, increased by $48.7 million primarily as a result of a full year of interest expense on incremental borrowings related to the 2015 C&W Group merger. Average annual borrowings increased from $1.6 billion during 2015 to $2.5 billion during 2016, with interest expense as a percentage of average outstanding debt decreasing from 8% in 2015 to 7% in 2016.

Benefit from income taxes

The benefit from income tax was $27.4 million, a decrease of $28.9 million. The benefit included the impact of valuation allowance and other discrete items. Refer to the Income Tax discussion in the Summary of Critical Accounting Policies and Estimates and Note 13 of the Notes to Consolidated Financial Statements for a further discussion of our effective tax rate.

Net loss and Adjusted EBITDA

Net loss decreased from $473.7 million in 2015 to $449.1 million in 2016, primarily driven by a full year of Fee revenue and Fee-based operating expense activity from the C&W Group merger, partially offset by higher interest expenses and a lower benefit from income taxes.

Adjusted EBITDA increased by $145.8 million or 45%, on a local currency basis, driven primarily by inclusion of a full year of activity from the C&W Group merger. Adjusted EBITDA margin, calculated on a Fee revenue basis, increased from 9% in 2015 to 10% in 2016.

 

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Segment Operations

Americas Results

The following table summarizes our results of operations by our Americas operating segment for the years ended December 31, 2017, 2016 and 2015 (in millions):

 

    Year
Ended
December 31,
2017
    Year
Ended
December 31,
2016
    Year
Ended
December 31,
2015
    % Change in
USD
    % Change in
Local Currency
 
    2017
v
2016
    2016
v
2015
    2017
v
2016
    2016
v
2015
 

Total revenue

  $         4,600.2     $         4,124.3     $         2,524.9       12%       63%       11%       63%  

Less: Gross contract costs

    (1,023.4     (851.4     (201.5     20%       n/m       20%       n/m  
Acquisition accounting adjustments     20.0       30.6       81.7       (35)%       (63)%       (35)%       (63)%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

  $ 3,596.8     $ 3,303.5     $ 2,405.1       9%       37%       9%       37%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

             

Property, facilities and project management

  $ 1,638.3     $ 1,445.4     $ 1,280.3       13%       13%       13%       13%  

Leasing

    1,244.6       1,140.7       830.7       9%       37%       9%       37%  

Capital markets

    530.4       536.2       203.4       (1)%       164%       (1)%       164%  

Valuation and other

    183.5       181.2       90.7       1%       100%       1%       100%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

  $ 3,596.8     $ 3,303.5     $ 2,405.1       9%       37%       9%       37%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating expenses

  $ 4,275.1     $ 3,843.8     $ 2,388.5       11%       61%       11%       61%  

Less: Gross contract costs

    (1,023.4     (851.4     (201.5     20%       n/m       20%       n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Total fee-based operating expenses   $ 3,251.7     $ 2,992.4     $ 2,187.0       9%       37%       8%       37%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 344.6     $ 311.6     $ 217.1       11%       44%       10%       44%  

Adjusted EBITDA Margin

    10%       9%       9%          

Year ended December 31, 2017 compared to year ended December 31, 2016

Americas revenue was $4.6 billion and Fee revenue was $3.6 billion, increases of $475.9 million and $293.3 million, respectively.

Fee revenue increased $284.4 million or 9%, on a local currency basis, reflecting broad growth across all four service lines. The increase in Fee revenue was driven primarily by Property, facilities and project management and Leasing.

Fee-based operating expenses were $3.3 billion, an 8% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by higher cost of services associated with Fee revenue growth.

Adjusted EBITDA increased by $32.0 million or 10%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 10%, compared to 9%.

Year ended December 31, 2016 compared to year ended December 31, 2015

Americas revenue was $4.1 billion and fee revenue was $3.3 billion, increases of $1.6 billion and $898.4 million, respectively.

 

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Fee revenue increased by $899.8 million or 37%, on a local currency basis, reflecting broad growth across all four service lines. The increase in Fee revenue was driven primarily by inclusion of a full year of activity from the C&W Group merger compared to four months of activity in 2015.

Fee-based operating expenses were $3.0 billion, a 37% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by inclusion of a full year of activity from the C&W Group merger.

Adjusted EBITDA increased by $94.7 million or 44%, on a local currency basis, driven primarily by inclusion of a full year of activity from the C&W Group merger. Adjusted EBITDA margin, calculated on a Fee revenue basis, was relatively unchanged.

EMEA Results

The following table summarizes our results of operations by our EMEA operating segment for the years ended December 31, 2017, 2016 and 2015 (in millions):

 

    Year
Ended
December 31,
2017
    Year
Ended
December 31,
2016
    Year
Ended
December 31,
2015
    % Change in
USD
    % Change
in Local
Currency
 
    2017
v
2016
    2016
v

2015
    2017
v
2016
    2016
v
2015
 

Total revenue

    $        863.3       $        755.5       $        541.1       14%       40%       14%       52%  

Less: Gross contract costs

    (81.3     (65.0     (30.9     25%       110%       28%       128%  

Acquisition accounting adjustments

    3.2       (0.8     16.9       n/m       n/m       n/m       n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

    $        785.2       $        689.7       $        527.1       14%       31%       13%       42%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

             

Property, facilities and project management

    $        200.5       $        172.9       $        132.6       16%       30%       16%       44%  

Leasing

    256.5       229.1       160.5       12%       43%       11%       54%  

Capital markets

    154.3       128.0       94.5       21%       35%       18%       46%  

Valuation and other

    173.9       159.7       139.5       9%       14%       9%       25%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

    $        785.2       $        689.7       $        527.1       14%       31%       13%       42%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating expenses

    $        769.8       $        670.9       $        494.3       15%       36%       15%       46%  

Less: Gross contract costs

    (81.3     (65.0     (30.9     25%       110%       28%       128%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee-based operating expenses

    $        688.5       $        605.9       $        463.4       14%       31%       14%       41%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

    $        108.8       $          90.8       $          68.0       20%       34%       12%       52%  

Adjusted EBITDA Margin

    14%       13%       13%          

Year ended December 31, 2017 compared to year ended December 31, 2016

EMEA revenue was $863.3 million and Fee revenue was $785.2 million, increases of $107.8 million and $95.5 million, respectively.

Fee revenue increased by $84.1 million or 13%, on a local currency basis, reflecting broad growth across all four service lines. The increase in Fee revenue was driven primarily by Property, facilities and project management, Leasing and Capital markets.

Fee-based operating expenses were $688.5 million, a 14% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by higher cost of services associated with Fee revenue growth.

 

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Adjusted EBITDA increased by $10.3 million or 12%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 14%, compared to 13%.

Year ended December 31, 2016 compared to year ended December 31, 2015

EMEA revenue was $755.5 million and Fee revenue was $689.7 million, increases of $214.4 million and $162.6 million, respectively.

Fee revenue increased by $192.7 million or 42%, on a local currency basis, reflecting broad growth across all four service lines. The increase in Fee revenue was driven primarily by inclusion of a full year of activity from the C&W Group merger compared to four months of activity in 2015.

Fee-based operating expenses were $605.9 million, a 41% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by inclusion of a full year of activity from the C&W Group merger.

Adjusted EBITDA increased by $29.8 million or 52%, on a local currency basis, driven primarily by inclusion of a full year of activity from the C&W Group merger. Adjusted EBITDA margin, calculated on a Fee revenue basis, was relatively unchanged.

APAC Results

The following table summarizes our results of operations by our APAC operating segment for the years ended December 31, 2017, 2016 and 2015 (in millions):

 

    Year
Ended
December 31,
2017
    Year
Ended
December 31,
2016
    Year
Ended
December 31,
2015
    % Change
in USD
    % Change
in Local
Currency
 
    2017
v
2016
    2016
v
2015
    2017
v
2016
    2016
v
2015
 

Total revenue

    $        1,460.4       $        1,335.9       $        1,127.2       9%       19%       8%       20%  

Less: Gross contract costs

    (522.6     (489.6     (443.2     7%       10%       4%       11%  

Acquisition accounting adjustments

    —         0.3       0.9       n/m       n/m       n/m       n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

    $           937.8       $           846.6       $           684.9       11%       24%       10%       26%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Service lines:

             

Property, facilities and project management

    $           649.7       $           572.4       $           464.8       14%       23%       12%       24%  

Leasing

    149.7       129.1       110.3       16%       17%       15%       20%  

Capital markets

    55.8       66.6       36.9       (16)%       80%       (16)%       80%  

Valuation and other

    82.6       78.5       72.9       5%       8%       6%       12%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee revenue

    $           937.8       $           846.6       $           684.9       11%       24%       10%       26%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment operating expenses

    $        1,386.1       $        1,265.0       $        1,077.5       10%       17%       8%       19%  

Less: Gross contract costs

    (522.6     (489.6     (443.2     7%       10%       4%       11%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fee-based operating expenses

    $           863.5       $           775.4       $           634.3       11%       22%       10%       24%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

    $             75.1       $             72.4       $             50.8       4%       43%       3%       44%  

Adjusted EBITDA Margin

    8%       9%       7%      

 

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Year ended December 31, 2017 compared to year ended December 31, 2016

APAC revenue was $1.5 billion and Fee revenue was $937.8 million, increases of $124.5 million and $91.2 million, respectively.

Fee revenue increased by $79.2 million or 10% on a local currency basis. The increase in Fee revenue was driven primarily by Property, facilities and project management and Leasing, partially offset by Capital markets.

Fee-based operating expenses were $863.5 million, a 10% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by higher cost of services associated with Fee revenue growth.

Adjusted EBITDA increased by $1.9 million or 3%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 8% compared to 9%.

Year ended December 31, 2016 compared to year ended December 31, 2015

APAC revenue was $1.3 billion and Fee revenue was $846.6 million, increases by $208.7 million and $161.7 million, respectively.

Fee revenue increased by $166.8 million or 26%, on a local currency basis, reflecting broad growth across all four service lines. The increase in Fee revenue was driven primarily by inclusion of a full year of activity from the C&W Group merger compared to four months of activity in 2015.

Fee-based operating expenses were $775.4 million, a 24% increase on a local currency basis. The growth in Fee-based operating expenses was driven primarily by inclusion of a full year of activity from the C&W Group merger.

Adjusted EBITDA increased by $21.3 million or 44%, on a local currency basis, driven primarily by inclusion of a full year of activity from the C&W Group merger. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 9%, compared to 7%.

Pro Forma Financial Information

We believe presenting unaudited supplemental pro forma information is beneficial to investors because it provides additional information to facilitate analysis of our financial results, as historical results for the year ended December 31, 2015 are not comparable to the results for the years ended December 31, 2017 and 2016 due to significant transactions that were completed during 2015, including the C&W Group Merger and C&W Financing Transactions (as defined in Note 1—Description of the Transactions). Supplementing the audited financial statements included elsewhere in this prospectus for the year ended December 31, 2015 with pro forma financial information for the year ended December 31, 2015 allows for a more meaningful comparison of the results for the years ended December 31, 2015 through 2017. Refer to the Notes to the unaudited supplemental pro forma combined statement of operations for the year ended December 31, 2015 for additional detail on the description of the transactions and applicable pro forma adjustments.

Unaudited Supplemental Pro Forma Combined Statement of Operations for the Year Ended December 31, 2015

The following unaudited supplemental pro forma combined statement of operations and explanatory notes for the year ended December 31, 2015, which have been prepared pursuant to Article 11 of Regulation S-X, give effect to the C&W Group Merger and C&W Financing Transactions (as defined in Note 1—Description of the Transactions) as if they had occurred on January 1, 2014.

 

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The unaudited supplemental pro forma combined statement of operations for the year ended December 31, 2015 has been derived from the historical financial information of DTZ (including Cassidy Turley) and C&W Group.

The historical consolidated financial information of DTZ for the 12 months ended December 31, 2015 has been derived from the audited historical consolidated statement of operations data for the year ended December 31, 2015 (“DTZ Historical”) included elsewhere in this prospectus. The historical consolidated financial information of C&W Group for the eight months ended August 31, 2015 (“C&W Group 8-Months Historical”) has been derived from the audited C&W Group statement of operations for the eight months ended August 31, 2015 included elsewhere in this prospectus.

The unaudited pro forma combined balance sheet as of December 31, 2015 is not presented because the audited balance sheet of Cushman & Wakefield plc as of December 31, 2015 already includes the financial position of C&W Group.

The unaudited supplemental pro forma combined statement of operations has been prepared pursuant to Article 11 of Regulation S-X and is based upon available information and assumptions that we believe are reasonable. The historical consolidated and combined consolidated financial information has been adjusted to give effect to pro forma adjustments that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. The supplemental pro forma combined statement of operations is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations would have been had the above transactions occurred on the dates indicated and also should not be considered representative of our future results of operations. The supplemental pro forma combined statement of operations does not reflect projected realization of revenue synergies and cost savings.

The following table presents the unaudited supplemental pro forma combined statement of operations for the year ended December 31, 2015 as described above:

 

    Historical              
(in millions)   DTZ Historical     C&W Group
8-Month Historical
(Note 1)
    Pro Forma
Adjustments
(Note 2)
    Pro Forma
Combined
 

Revenue

  $ 4,193.2     $ 1,825.8     $ —       $ 6,019.0  

Costs and expenses:

       

Cost of services (exclusive of depreciation and amortization)

    3,386.3       1,112.7       —         4,499.0  

Operating, administrative and other

    858.6       641.8       (68.3) (a),(b),(e)      1,432.1  

Depreciation and amortization

    155.9       41.2       63.0 (a)      260.1  

Restructuring, impairment and related charges

    202.8       0.5       —         203.3  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    4,603.6       1,796.2       (5.3)       6,394.5  
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

    (410.4)       29.6       5.3       (375.5)  

Interest (expense), net of interest income

    (123.1)       (5.3)       3.1 (c),(d)      (125.3)  

Earnings from equity method investments

    4.6       —         —         4.6  

Other income (expense), net

    (0.2)       (40.8)       34.0 (b)      (7.0)  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (529.1)       (16.5)       42.4       (503.2)  

Provision (benefit) from income taxes

    (56.3)       5.9       14.9 (f)      (35.5)  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (472.8)       (22.4)       27.5       (467.7)  

Less: Net (loss) income attributable to non-controlling interests

    0.9       —         —         0.9  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to the Company

  $ (473.7)     $ (22.4)     $ 27.5     $ (468.6)  
 

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the Unaudited Supplemental Pro Forma Combined Statement of Operations.

 

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Notes to the Unaudited Supplemental Pro Forma Combined Statement of Operations for the Year Ended December 31, 2015

Note 1—Description of the Transactions

C&W Group Merger and C&W Financing Transactions

On September 1, 2015, the Company completed the acquisition of C&W Group, referred to herein as the “C&W Group Merger.” The total consideration for the C&W Group Merger was cash of $1.9 billion. The consideration transferred was funded in part by equity contributions from the Sponsors totaling $940.0 million and net proceeds of $1.3 billion from debt issued. On the acquisition date, the First Lien Credit Agreement was amended. Under the First Lien Credit Agreement, as amended, the Company refinanced the outstanding principal of $746.3 million under the First Lien Loan and borrowed an additional $1.1 billion under the First Lien Credit Agreement. Additionally, the Company borrowed an additional $250.0 million under the Second Lien Credit Agreement. The additional $1.1 billion under the First Lien Credit Agreement and the additional $250.0 million under the Second Lien Credit Agreement are collectively referred to as the “C&W Financing Transactions,” and the C&W Group Merger along with the corresponding C&W Financing Transactions are collectively referred to as the “C&W Transactions.”

The historical consolidated financial information of DTZ for the 12 months ended December 31, 2015 has been derived from the historical audited DTZ statement of operations data for the period January 1, 2015 through December 31, 2015 included elsewhere in this prospectus. The historical consolidated financial information of C&W Group for the 8 months ended August 31, 2015 has been derived from the audited C&W Group statement of operations for the period January 1, 2015 through August 31, 2015 included elsewhere in this prospectus.

The adjustments disclosed in Note 2—Pro forma adjustments for the combined consolidated statement of operations for the fiscal year ended December 31, 2015 below are derived from fair values recorded for assets acquired and liabilities assumed of C&W Group.

Note 2—Pro Forma Adjustments for the Combined Statement of Operations for the Year Ended December 31, 2015

 

(a)

Represents additional fixed asset depreciation and intangible asset amortization of $62.8 million as a result of recording assets acquired and liabilities assumed at fair value pursuant to acquisition accounting; of which, $63.0 million is reflected in Depreciation and amortization, and $(0.2) million is reflected in Operating, administrative and other. Refer below for a breakout of the incremental amortization expense on the identified definite-lived intangible assets acquired with the C&W Group Merger:

 

    Fair value     Weighted
avg. useful
life
(in years)
    Pro forma
amortization
expense
(annual)
    Pro forma
amortization
expense
(8-month)
 

Above market leases

  $ 9.5       11     $ 1.1     $ 0.8  

Trade name

    546.0       Indefinite       —         —    

Customer relationships

    599.6       6       112.2       74.8  

Alliance networks

    5.0       7       0.7       0.5  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,160.1       N/A     $ 114.0     $ 76.1  

Less: C&W Group 8-Month Historical amortization expense

        $ (13.1)  
       

 

 

 

C&W Group pro forma amortization expense

        $ 63.0  
       

 

 

 

Other:

       

Below market leases

  $ (0.8)       3     $ (0.2)     $ (0.2)  

 

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(b)

Represents the removal of transaction costs of $93.6 million, which was directly attributable to the acquisitions but did not have a continuing impact on the Company’s operations. Of the total $93.6 million, $59.6 million was reflected in Operating, administrative and other, and $34.0 million was reflected in Other income (expense).

 

(c)

Represents additional interest expense of $16.6 million in connection with the C&W Financing Transactions, within Interest expense, net of interest income. For each 1/8 percent variance in the applicable interest rates in excess of LIBOR, pro forma interest expense would change by approximately $2.5 million on an annual basis. Refer below for a breakout of the incremental interest expense in connection with the C&W Financing Transactions:

 

    Face
value
    Original
issuance
discount
(OID)
    Deferred
financing
cost
    Net
value
    Stated
interest
rate
    Stated
interest
    Amortization
of OID
    Amortization
of deferred
financing
costs
    Interest
expense
adjustment
 

Amended 1st Lien

    1,801.3       (10.9)       (38.2)       1,752.2       4.25     76.3       1.4       4.9       82.6  

Amended 2nd Lien

    250.0       (5.4)       (1.2)       243.4       8.75     21.8       0.5       0.1       22.4  
                 

 

 

 
                    105.0  

Less:

                 

Historical interest expense of DTZ

                    (76.2)  

Historical interest expense of C&W Group

                    (12.2)  
            <