Are Companies Overlooking the ‘X Factor’ in M&As?

Merger and acquisition activity is predicted to increase in 2014 across several industries, specifically in financial services, life sciences, energy and technology. Yet several companies often overlook the "X factor" that could make or break the success of a deal, according to JLL.
Doug Sharp

Doug Sharp, JLL

While merger and acquisition activity is predicted to increase in 2014 across several industries, specifically in financial services, life sciences, energy and technology; several companies often overlook the “X factor” that could  make or break the success of a deal, as in value hidden in corporate real estate portfolios, according to JLL experts.

“While real estate is only one of the key factors that determine the success of a merger or an acquisition, it is the ‘X factor’ that can add real value,” said Doug Sharp, president of JLL’s Corporate Solutions, Americas, business in the news release. “When used strategically, corporate real estate can help a buyer edge out the competition for the greatest return on the deal.” JLL suggests these three strategies for using corporate real estate to maximize the value of a merger or acquisition:

1). Engage early: Bring the corporate real estate  team during due diligence. An acute point of the M&A process, the due diligence phase also involves the highest risk. Therefore engaging the corporate real estate team during that phase will help a company analyze the value of real estate assets and investors will better understand the value and the risk that could be hidden under  layers of leases and building valuations.

“The due diligence process is typically very fast-paced and intelligence about the target company’s real estate portfolio may not be easily accessible,”  Roger Humphrey, executive managing director of JLL’s Life Sciences group told Commercial Property Executive. “Access to local market experts can provide a faster and more accurate assessment of the future combined portfolio.”

For Merck, having an external partner in JLL provided speedy access to real-time global market intelligence to support the transaction negotiations, according to Humphrey.

2). Identify immediate cost savings: Know in advance where redundant facilities can be consolidated when the deal is closed. From pre-offer to post-close, the corporate real estate team must be equipped with robust business intelligence, processes, tools and expertise to assess teh real estate portfolio.

3). Be diligent about change management: Execute for long-term post-transaction success. After a deal closes, the faster an organization can rationalize the corporate real estate portfolio, the faster cost savings will translate into returns.