The Leader - January/February 2009 - (Page 14)

Merg e rs & A cq u i s i t i o ns: H ow r eA l estA te cA n Pl Ay A Ke y ro le  Supporting and informing the due diligence process underpinning the transaction and determining deal price  Improving the speed, efficiency and effectiveness of the integration process  Assisting in the minimization of operational and financial risks to the organization pre- and post-integration  Ensuring that the revised real estate portfolio is fit for purpose, has a common standard of quality and appropriate working styles  Enabling the business to maximize capital release from surplus (and in some instances operational) real estate Best in class CRE teams fulfill these tasks. In doing so, they not only add value to the business through the M&A process, but they also establish a stronger and more influential position for themselves within the business. portfolio of the highest possible quality but with the lowest possible number of occupied units. M&A presents the opportunity to take a strategic view of the corporate portfolio and the ability to implement changes is enhanced by the broader climate of transformation. Buy-in is particularly strong if clear pay-back financially and operationally can be demonstrated to the business. Use the challenges of M&A to strengthen the position, profile and effectiveness of the CRE resource. Five ways to Maximize opportunity and strengthen Position Within this broad framework of activities, there are five specific but inter-linked opportunities open to CRE teams to bolster both the effectiveness of the merger and create stronger board room endorsement of the CRE function. Best in class examples display a number of the following traits: Identify opportunities to release capital and return funds back to the business. The acquisition of asset rich companies creates a clear opportunity to release capital. Often the assets acquired will be carried at depreciated historical costs and will not be fully reflective of the full market value either for current, or in some cases alternative, uses. This creates opportunities to secure debt against the properties, carry out sale and leaseback deals, or rationalize and dispose of surplus properties in order to release capital back into the business. Reduce the ‘roof-tops’ and establish a fit for purpose real estate portfolio. Effective CRE teams develop a deep understanding of the operational needs of the restructured firm and use this to establish a ‘fit for purpose’ Every option to dispose of surplus space should be explored. Some corporations have decided that the best solution is to dispose of their surplus property portfolio wholesale to an outsourced provider. While there will be a risk premium to pay, many find it worth it for the certainty such an approach brings. Instill and drive workplace transformation. The size of the occupied portfolio can also be reduced through the implementation of new workplace strategies. The adoption of alternative working styles – hot-desks, break-out areas, open plan seating arrangements and so forth – is also a vital instrument in creating an environment capable of attracting and retaining talent. This takes on added importance in organizations going through M&A where a lot of uncertainty and change already exists for employees. The combination of two organizations typically leads to disparities in space utilization standards across the revised portfolio. The adoption of new common standards and the application of a consistent quality of space and fit-out across the portfolio brings wider business advantages by aiding the transition to a new, shared culture and identify for the merged firm. Have a strong, unstinting focus on reducing operating cost. In our experience effective CRE teams are handed an aggressive mandate from the management of the restructured business to drive down operating costs. In addition to reducing the size of the portfolio, this can be achieved by consolidating existing teams, optimizing the timing of new or renewed lease commitments to align with favorable market conditions and even through the facilitation of outsourced of offshore service provision. An often overlooked opportunity arises from leveraging the benefits of increased scale to secure efficiencies in procurement and sourcing from all suppliers. Use the challenges of M&A to strengthen the position, profile and effectiveness of the CRE resource. The strength and spirit of the internal infrastructure will determine how well a CRE team responds to the stresses and effects of transition and how it fares in the aftermath. Solid CRE platforms include skilled people with real estate, workplace design, finance, strategy, and relationship management skills. A behavioral element also needs to be considered. Effective CRE teams are highly attuned and responsive to the (changing) needs of the business during the process. They are prepared to give, and be accountable for, a view even when comprehensive information is unavailable. Such teams are multi-skilled, multi-tasking but strongly focused on supporting the business to implement change. Five ways to reduce Pain and risk There is a long history of M&A failures. Research has suggested that these are the result of either transactional failures (that is, factors relating to the structure of the deal) or transitional failures like post-merger integration. Market leading CRE teams focus on five key issues to ensure that the sources of potential pain, and hence risk, are alleviated. 2 0 0 9 tH e le Ade r 14 JAnuAry / FebruAry

Table of Contents Feed for the Digital Edition of The Leader - January/February 2009

The Leader - January/February 2009 Contents Leadership Message from the CEO Real Estate in the News Mergers and Aquisitions Assessing Green Building Performance Measuring Space You Actually Use Global Trends in Sustainable Real Estate Whirlpool’s Lee Utke Northmarq’s Kevin Farrell Plastics: Hoping for Resiliency in Resins Regional Profile: Heartland Holding Strong Industry Profile: Ascendas Brings New Age Business Space to Asia-Pac Industry Tracker From the Applied Research Center Discovery Forum Findings Capital Corner Career Development Young Leader Economic Development in the News Learning Spotlight Connect With CoreNet Global Index of Advertisers A Look Ahead In our Next Issue Calendar of Seminars

The Leader - January/February 2009

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