Avison Young (Canada) Inc.

The stable outlook reflects S&P Global Ratings' expectation that Avison Young will successfully integrate the GVA acquisition while bolstering earnings and reducing leverage. We expect the company will continue to focus on growing noncyclical revenues and that it will deploy the remaining preferred stock commitments (C$50 million as of June 2019) judiciously to grow earnings. Although unlikely, we could lower the rating over the next 12 months if the company has difficulty growing earnings, loses market share, or experiences pressure on liquidity. We could raise the rating over the next 12 months if we expect the company's leverage, measured as net debt to adjusted EBITDA, to fall below 6.0x on a consistent basis and the firm scales back on its

...Relatively small player in the highly competitive commercial real estate (CRE) services industry with an acquisitive growth strategy. Although Avison Young's pro forma revenues (including the GVA Grimley Holdings Ltd. [GVA] acquisition in the U.K. in February 2019) surpassed C$1 billion, we believe it lacks the scale of larger peers such as CBRE Services Inc., Jones Lang LaSalle Inc., and Cushman & Wakefield. We expect the company to continue to grow through recruiting and tuck-in acquisitions and expand geographically, particularly in U.S. and Europe. We also expect that the company will prudently manage the operational and financial risks associated with its growth ambitions. Deleveraging following the recent recapitalization and acquisition will be slow. Pro forma for the GVA acquisition, net debt to EBITDA has risen above 8.0x due primarily to incremental debt issuance and preferred stock, which we treat as debt. The acquisition bolsters earnings, and we expect the leverage to decline...

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