Case Study Title
AJU Hotels & Resorts Serviced Apartment Acquisition Advisory
Aju Hotels & Resorts, an international hotel investment company, based in Asia, entered the bidding process for a major UK serviced apartment operating/owning company.
The serviced apartment company was being disposed of by its owners through a London-based real estate investment banking company. The business consisted of an established serviced apartment estate and a small number of units in development, all located in the UK. The business was also in the process of expanding both business models overseas in other EU countries. The opportunity was being marketed to a small group of potential investors by way of an Offering Memorandum which described the existing estates, those units in development and forward-looking forecasts of the financial performance of the group, as it was intended to expand.
The vendor had called for indicative offers for the business to be submitted within two weeks. The Client therefore asked Hotel Solutions Partnership to prepare high-level estimates of economic worth of the individual business components with background information being made available in an online virtual data room.
Hotel Solutions Partnership Approach
Two HSP consultants, Jude Bolger based in Brisbane Australia and David Williams in Hong Kong, were briefed and mobilised immediately and held several phone conferences with the Client to decide on the approved approach for compiling the bids.
Scope of Work
Access was granted to the Offering Memorandum and to a virtual data room. HSP commenced work developing its proprietary P&L models and customised them to the particular requirements for estimating a range of values for the subject serviced apartment group.
The team adopted a consistent approach to estimating the economic worth of the portfolio, utilising two methods- the discounted cash flow approach, and the capitalisation of stabilised earnings approach. After estimating the economic worth of all the individual assets, we consolidated them into a whole-enterprise bid. This proved to be sufficiently attractive for the Client to pursue further detailed negotiations with the vendor.
There were then further substantial disclosures of financial, market and operational data. Whilst the asset valuations were being refined in the light of the new information, the Client requested a more in-depth analysis of the relevant market conditions. As a result, Jude produced a separate substantial “Acquisition Market Intelligence Report” to assist with the Client’s appreciation of the SWOTs involved in this business.
At the same time another HSP consultant, Ian Oram, a Chartered Surveyor, visited a number of properties in the portfolio to gain an appreciation of the physical condition of some of the assets. HSP submitted its second report with revised valuations and further advice on caveats regarding the proposed transactions. The Client submitted a revised offer.
David mobilised a team of HSP consultants to undertake a proposed due diligence exercise during the expected six weeks of negotiation. The team consisted of specialists in the following areas Finance/Control/Governance; IT Systems; Human Capital; Sales and Marketing; Development Strategy and Technical Property Survey. Katrina Craig, HSP’s CEO, advised the client on how the Client’s organization might change post acquisition in order to roll out the brand platform in Asia and the US. In the final bidding round, despite being the frontrunner, the Client withdrew from the transaction due to some force majeur factors.
What did Hotel Solutions Partnership achieve for the Client?
The HSP consultants responded very quickly to the Client’s requirements at each stage of the acquisition process and were commended by the Client for their dedication, professionalism and achievement of deliverables within the tight deadlines set. The relationship with the Client was characterised by them as “a true partnership”.
HSP was able to supplement and support the Client’s own team with the expertise that they did not possess. The Client obtained the financial analysis that they required quickly and accurately, together with valuable independent advice on due diligence and caveats throughout the process, based on the substantial skill and depth of experience of the HSP consultants.