MERGERS AND ACQUISITIONS

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1 WHITEPAPER MERGERS AND ACQUISITIONS Making The Right Real Estate Moves

2 Corporate Real Estate is typically one of the top three assets of every company, and is often under-valued or ignored in M&A transactions. Having a defined real estate strategy and determining how to handle the portfolio before, during, and after a M&A transaction is critical to a company s overall success.

3 OVERVIEW After spending over $3.8 trillion in 2015, the highest amount ever, mergers and acquisitions are predicted to continue at a strong pace in Understanding how to optimize the integration process before, during, and after the transaction is essential to creating the best results for both entities. Commercial real estate teams can and should play a pivotal role in supporting organizations through the enormous changes and challenges presented by mergers and acquisitions. Understanding the monetary and utility values of the real estate portfolios, having a clear strategy that aligns the portfolio with business goals and objectives, and finishing with a strong execution strategy maximizes opportunity and strengthens the position of the company. 1 DUE DILIGENCE 2 STRATEGY 3 INTEGRATION

4 DUE DILIGENCE GOALS The goals of the due diligence phase is to develop an accurate assessment of the combined real estate portfolio and its operational and investment value to the organization. It s also crucial to effectively manage the transaction while positioning real estate to create value and maximize opportunities. USING REAL ESTATE TO GENERATE ENTERPRISE VALUE Real estate can be an immediate catalyst for liquidity and an immediate source of cost reductions. Understanding both real estate portfolios allows for both the identification of favorable financial opportunities, and the early warning of issues that can be addressed during negotiations. RECOMMENDATIONS We recommend creating an evaluation matrix, ranking each of the properties on such factors as location, efficiency, utilization, access, availability of skilled work force, and operating expenses. Next, compare estimated market values to book values to determine potential gains and losses of integrating the portfolios. Objective evaluation standards will help to kick-start the process of determining which facilities may be expendable and which will be important going forward, and get everyone involved on the same page to create value. HOW TO USE CRE: PERFORM RESEARCH AND MAKE DECISIONS Identify values & high level opportunities Quantify potential risks and problems Create a summary of property and portfolio reviews This analysis will provide an accurate assessment of the current portfolios, and identify favorable lease situations, undervalued assets, and current and potential asset utilization. ALIGN ASSETS Placing Real Estate on the same level as other assets allows companies to see the hidden economic and operational value of their combined holdings.

5 STRATEGY INTEGRATION ALIGN REAL ESTATE STRATEGIES WITH BUSINESS OBJECTIVES Understand future business direction and strategy Identify essential, non-essential, and future (needed) real estate Turn real estate into a competitive advantage During a potental M&A, it s important to evaluate where the business is going and then determine how the existing real estate does or does not fit into that plan. It is also necessary at this stage to create a strategy to potentially dispose or reposition the properties - sale, sublease, sale/lease back, refinance, lease termination, lease re-negotiations, sitedevelopment, etc. THINGS TO CONSIDER: Market Conditions Transaction Time Lines GAAP / Tax Gains and Losses Consolidation Possibilities Viability of Lease Terminations Lease Renegotiation Opportunities Environmental Liabilities Potential Costs Involved Real estate can be a highly effective integration tool in the merger. Having a strong portfolio plan and efficiently executing the strategies creates successful M&As. ROLE OF REAL ESTATE DURING THE INTEGRATION PHASE Collect and execute facility acquisition, consolidation, refinancing, and disposition requests from business units Bring in expertise and support from external advisors Consolidate commercial real estate staff, systems, and real estate data to assure seamless transition to a combined platform HOW TO USE CRE: STRATEGY, CLARITY, PLAN OF ACTION Create commercial real estate strategy that aligns with corporate strategy and wider business objectives Challenge and seek clarity until detailed and full understanding of direction and needs of combined business is achieved; internal political and parochial biases are often major obstacles Rapid identification of opportunities can reduce costs, generate cash, improve efficiency, and exploit market conditions

6 Your real estate is an asset, not a liability Corporate Real Estate should retain flexibility and develop new approaches to space utilization. Innovative workplace strategies play a crucial role in a productive work environment that contribute to the retention of valued employees. Putting a long-term strategy into play and elevating real estate early on in the decision helps secure competitive advantage and can make a profound impact on the entire organization s bottom line. Best in class commercial real estate teams maximize opportunities and minimize risk while focusing on value drivers. Having ample time, strategy, and experience will help create the best transitions and make the M&A process favorable for everyone.

7 ABOUT WELSH & COLLIERS INTERNATIONAL As the business world continues to change quickly, you need a commercial real estate partner who can keep up the pace. A business advisor with the knowledge and ability to look at how real estate impacts each aspect of your business strategy. That s where we come in. Integrated Services with Answers to Your Business Questions Brokerage: Is is it better to move to a new location, or stay in my current space? Construction: What kind of improvements can I make to my office space? Property Management: Are my property managers dependable and responsive? Capital: Would owning my space be more beneficial than leasing it? Architecture: Does the design of my space help me attract top talent? Facility Services: Is my space properly maintained creating a workplace free of distractions? As your commercial real estate partner, whether you use one, a few, or all of our services, you have access to all of our in-house specialists. We bring different perspectives to the table. We get creative. We work through challenges. And at the end of the day, we get you results.

8 Learn more about Welsh and Colliers International news and current events: Subscribe to our blog on welshco.com Follow us @colliersmsp Connect with us on LinkedIn: Welsh & Colliers MSP Local Expertise. Global Reach. Welsh partners with Colliers International for brokerage and real estate management services. EEO/AA Employer ARCHITECTURE BROKERAGE CAPITAL CONSTRUCTION FACILITY SERVICES PROJECT MANAGEMENT REAL ESTATE MANAGEMENT