Mergers & Acquisitions: How Real Estate Can Play A Key Role

With M&A activity on the rise, a company’s occupancy terms can be a hidden asset, or an unexpected liability. On one hand, prevailing obligations might serve as a competitive advantage that contributes to greater profitability.  On the other, they might add significant debt and thereby constrain the capacity for growth. Since facilities costs are typically the second or third largest spend category, the impact could be major.  M&A events can be great opportunities to reevaluate the real estate function and how it supports the overall business goals.

Early in the M&A due diligence process, the financial and operational merits of the real estate interests – whether leased or owned – should be thoroughly identified.  This can take considerable time, especially if it is a multiple location proposition, so the sooner it is started the better.  A dedicated Tenant Representation team can help gather the necessary information quickly, and provide comprehensive and unbiased analysis, from which short term and long term objectives can be set to eliminate redundancies, monetize excess, improve efficiencies, engage market competition, increase flexibility, enhance image, formulate best practices, etc. Implementation of strategy without delay is imperative to maximizing value.

In our experience, corporate real estate can be an important source of liquidity and returns when it is treated not simply as an expenditure, but rather on the same level as human capital and technology (which round out the top three items on the balance sheet generally), and when it is planned annually instead of at expiration. Executives that view their commercial property as a lever to business, and not just as a place to conduct business, will have a leg-up.


Contributing Author:


Ryan O'Rourke
Vice President
Block Real Estate Services, LLC
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