Foxtons has just announced the acquisition of Haslams and Imagine, expanding its presence in the London commuter towns of Guildford and Woking.

Haslams operates from three branches and is primarily focussed on the commuter town of Reading, with additional coverage of the nearby towns of Wokingham and Crowthorne through its Michael Hardy brand.

Imagine operates from three branches and is focussed on the commuter town of Watford and its surrounding areas.

Both businesses are being bought from private individual shareholders.

Total initial consideration is £12.6m, with £3.4m of total deferred consideration contingent on the delivery of performance targets. Haslams’ initial consideration is £7.6m, with £2.4m deferred, and Imagine’s initial consideration is £5m, with £1m deferred.

Foxtons explained the strategic rationale in a statement:

+ The Acquisitions reflect further progress against the Group’s strategy to acquire high quality, earnings accretive, lettings focused businesses, with synergistic growth opportunities which increase the Group’s exposure to recurring lettings revenues (lettings revenue accounts for c.60% of total revenue for each acquisition).

+ The Acquisitions expand Foxtons’ network into the new complementary markets of Reading and Watford.

+ Both markets are commuter towns with excellent transport links to London, with Central London accessible in under 30 minutes.

+ Both markets are forecast to deliver leading levels of economic growth versus the rest of the UK, with Reading forecast to become the UK’s fastest growing location by 2027.

+ The Acquisitions build on Foxtons’ success in the London commuter towns of Guildford and Woking.

+ Both acquisitions are the largest lettings and sales agents in their core markets and increase the Group’s branch footprint to 64 branches. The Acquisitions will deliver a further c.2,900 tenancies (Haslams: c.1,700, Imagine: c.1,200), increasing the size of Foxtons’ portfolio of tenancies by c.10% to over 31,000 tenancies.

+ Experienced management teams, with the added support of the Foxtons Operating Platform, are well placed to deliver attractive returns on invested capital by leveraging Foxtons’ technology and data capabilities, realising synergies and combining B2B expertise and relationships across the New Homes and Build to Rent sectors.

+ The Acquisitions will act as strategic hubs to unlock growth opportunities in the areas surrounding Reading and Watford, both organically and through further synergistic bolt-on acquisitions.

+ The Acquisitions build on Foxtons’ successful track record of identifying, acquiring and integrating high quality lettings focused businesses.

Haslams’ unaudited total revenue and operating profit for the 12 months ended 31 December 2023 was £6.5m and £0.8m respectively. Initial consideration for the acquisition, on a cash and debt free basis, is £7.6m, with £2.4m deferred and contingent on the delivery of performance targets.

Imagine’s unaudited total revenue and operating profit for the 12 months ended 31 March 2024 was £3.3m and £0.5m respectively. Initial consideration for the acquisition, on a cash and debt free basis, is £5.0m, with £1.0m deferred and contingent on the delivery of performance targets.

Following the delivery of growth initiatives and operating synergies, the businesses are expected to deliver significantly higher levels of profitability from the levels historically reported by the acquisitions. The purchases will be accretive to the group’s 2025 adjusted earnings per share, with further accretion in 2026 and beyond as the impact of synergies annualise. The acquisitions are expected to deliver attractive long term returns on capital, and at a level above the group’s weighted average cost of capital.

The acquisitions will be funded using the group’s £30m revolving credit facility which has the option to be extended to £40m subject to bank approval. The Group’s proforma net debt to adjusted EBITDA ratio is expected to be marginally below 1x at 31 December 2024.

Guy Gittins (left), Foxtons CEO, commented: “Our latest acquisitions add to our strong track record of identifying, acquiring, and integrating high quality lettings businesses to deliver attractive returns and are a key part of our strategy to deliver £25-30m adjusted operating profit in the medium term.

“We are delighted to have completed the acquisitions of Haslams and Imagine as we continue to pursue acquisitive lettings growth, to supplement our organic growth strategies. We have been impressed with the quality of both businesses which hold established leadership positions in their local markets and have built long-standing client relationships over many years, making them a great fit with Foxtons.

“Reading and Watford are new markets for Foxtons and reflects our confidence that the Foxtons Operating Platform, and in particular our technology, data and reach can unlock new growth opportunities in these new markets.”

Steve Woodford, Haslams executive chairman, commented: “Having led The Haslams Group for over three decades, it was important to me for our buyer to be a custodian of our business, building on our existing successes and nurturing the exceptional expertise across the Group. Foxtons was the perfect fit and I’m looking forward to seeing how both businesses will excel after combining forces. With the ability to leverage the power of Foxtons’ platform, I’m extremely confident the business will go from strength-to-strength.”

Mike Cole, Imagine group managing director, added: “After leading the business for nearly 20 years, the time was right for new energy and investment. The property landscape is changing, and it is essential agents have the best technology, marketing and brand awareness to stay ahead, which is why we chose Foxtons to take the business forward. Foxtons’ expansion into Hertfordshire is one of the most exciting developments the local market has seen for two decades, and I have no doubt our exceptional staff and long-standing clients will be excited about our offering being supercharged by Foxtons.”