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CHICAGO, IL

Are You Overlooking the “X Factor” in an M&A?

JLL shares three strategies to use corporate real estate to increase returns during a merger or acquisition


CHICAGO, March 13, 2014 – Market analysts expect merger and acquisition (M&A) volume to increase in 2014 across industries, particularly in financial services, life sciences, energy and technology. Despite the growing frequency of M&A activity, many companies often overlook the “X factor” that can make or break the success of the deal: value hidden in corporate real estate portfolios. According to JLL experts, companies can ensure a positive M&A by using three primary strategies: engage early; identify immediate integration cost savings; and, be diligent about change management for long-term success.

“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,” says Doug Sharp, President of JLL’s Americas Corporate Solutions. “When used strategically, corporate real estate can help a buyer edge out the competition for the greatest return on the deal.”

Sharp recommends three strategies for using corporate real estate to maximize the value of a merger or acquisition:

1) Engage early: Bring in the corporate real estate team during due diligence.

A critical component of the M&A process, the due diligence phase is also one that entails the highest risk. Engaging the corporate real estate team during due diligence will help a company scrutinize the value of the real estate assets. By doing so, investors will better understand the value and the risk that can be hidden under layers of leases and building valuations. In a recent M&A, a JLL client saved $75 million by conducting a close analysis of the target company’s corporate real estate portfolio, and acting on the immediate savings opportunities.

“Buy-side stakeholders should evaluate both companies’ corporate real estate assets during the pre-offer and pre-close to identify synergies and risks in the portfolio,” advises Sharp. “Each potential cost-saving discovery made during this process can result in increased acquisition price flexibility and a more accurate valuation of the company.”

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 the real estate portfolio. With the right data and analytics, the real estate team will be able to provide scenarios for the future portfolio in a matter of days.

“Companies need to ask the right questions during the M&A due diligence process to fully understand the corporate real estate portfolio,” says Sharp. “Where do portfolios overlap? What is the value of surplus facilities? Are there hidden risks in the corporate real estate portfolio that will hinder integration? What will the fully integrated portfolio look like?”

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.

“Often, organizations attempt post-transaction integration with resources that don’t offer a fast-paced program, creating a lag on results,” warns Sharp. “An M&A has many moving parts, so a company needs to ramp up and put the right players in the right positions to ensure integration success as rapidly as possible.”

Companies should create a program management office and governance framework to streamline real estate integration activities following the closing. This should position team members for success through a playbook that incorporates standardized tools, best practices, lessons learned and how-to information.    

However, the program management function will only be as successful as the execution team, which, ideally, will include workplace strategists, CPAs, legal specialists, architects, project managers and commercial real estate brokers experienced with M&A. Also important is the systematic application of a change management program focused on the people who will be affected by real estate decisions, integrated with the larger corporate change management program.

A leader in the real estate outsourcing field, JLL’s Corporate Solutions business helps corporations improve productivity in the cost, efficiency and performance of their national, regional or global real estate portfolios by creating outsourcing partnerships to manage and execute a range of corporate real estate services. This service delivery capability helps corporations improve business performance, particularly as companies turn to the outsourcing of their real estate activity as a way to manage expenses and enhance profitability.

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About JLL
JLL (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit www.jll.com.