The Leader - May/June 2010 - (Page 17)
REALIZING THE POTENTIAL OF DIVESTITURE & RESTRUCTURING ACTIVITY: A REAL ESTATE & FACILITIES PERSPECTIVE
services operating models for the planning and delivery of support and infrastructure services. The centrally managed or shared services often include activities from a wide array of enabling functions, including finance, human resources, information technology, legal, real estate and facilities. In the process of shifting from business unit or division-focused service delivery to a shared services model, organizations were able to increase efficiencies and better leverage economies of scale. Implementing a shared services approach often required the transfer of staff, skills and expertise that originally resided within business units or divisions to the newly formed shared services group. By leveraging staff across multiple business units or divisions, individual employee utilization increased, and the total number of staff required to deliver a given service decreased. While overall operating costs for the enterprise typically decreased in the shift to shared services, the dependency of business units on the corporate shared services entity increased. As with most enabling functions, a greater degree of entanglement with “corporate” relative to real estate and facilities management service delivery results in physical and operational separation challenges when a company decides to divest itself of a specific business unit or division. Given the relative speed with which many divestiture transactions occur, the buyer often needs to purchase transitional services from the seller to minimize business disruption during separation efforts. If you are dealing with a strategic buyer, the infrastructure may already be in place to provide the required real estate and facilities management services, thereby mitigating the need for complex and potentially costly transitional services. When a financial buyer is in the mix, transition service agreements (TSAs) are more likely to be required because many private equity firms often manage their portfolio companies as stand-alone entities poised for an IPO or eventual sale to a strategic or other financial buyer. From the buyer’s perspective, the timeframe associated with TSAs should
be minimized to encourage timely separation from the seller and drive increased cost effectiveness. As the seller is not likely to be in the business of providing services to external entities, there is typically limited incentive to provide high-quality services. TSAs can be an expensive option for the buyer, and costs often increase significantly should the buyer require services beyond the originally negotiated TSA timeframe. Collectively, these factors drive the need for the carved-out entity to stand up as an independent business as quickly as possible.
At press time, George G. Bouri had accepted the position of Senior Vice President, Global Real Estate & Facilities Services, for Time Warner.
About the Authors
George G. Bouri, SLCR, MCR, is a Principal in Deloitte Consulting’s Strategy & Operations Group and the Leader of the Capital Assets and Real Estate Transformation Practice. Francisco J. Acoba, SLCR, MCR, is a Senior Manager in Deloitte Consulting’s Strategy & Operations group and is part of the Capital and Real Estate Transformation Practice. Sean Goldstein is a Manager in Deloitte Consulting’s Strategy & Operations Group and is part of the Capital and Real Estate Transformation Practice.
By actively managing the presented challenges, both sellers and buyers can better optimize value of the retained and divested real estate and facility portfolios, respectively. With the increased number of anticipated divestiture transactions, an opportunity exists to establish a critical review of real estate and facilities management costs as a core component of pre-deal evaluation efforts. To prepare for the potential divestiture, real estate and facilities management professionals should: ‡ Maintain a comprehensive and detailed database of owned properties and expense/income leases ‡ Understand the total cost of ownership/operations associated with the portfolio ‡ Understand the strategic business plan for each division within the company/organization ‡ Understand the key real estate and facility dependencies between the “corporate” entity and each division, including matters related to space, services, outsourcing contracts, IT infrastructure, etc. By continuing to demonstrate value add, the real estate and facilities management lead can earn a “seat at the table” and properly position the function for future success.
For more information on this topic, go to CoreNet Global’s Knowledge Center Online. Mergers & Acquisitions: How Real Estate Can Play a Key Role http://www2.corenetglobal.org/dotCMS/ kcoAsset?assetInode=4820515 Beyond Due Diligence: Enhancing Corporate Real Estate’s Value in Mergers and Acquisitions http://www2.corenetglobal.org/dotCMS/ kcoAsset?assetInode=5397754
This is a condensed version of the original article. The complete article is available in the online version of THE LEADER magazine, at www.corenetglobal.org.
2 0 1 0 TH E LEADER
MAY / JUNE
Table of Contents for the Digital Edition of The Leader - May/June 2010
The Leader - May /June 2010
Message From The Ceo
Real Estate In The News
Realizing The Potential Of Divestiture & Restructuring Activity
Real Estate Strategy
A Work In Progress
The Surplus Property Dilemma
Piedmont Office Realty Trust’s Bo Reddic
Coca-Cola Enterprises’ Matt Fanoe
Southwest Michigan First’s Ronald R. Kitchens
From The Forums
Economic Development In The News
A Look Ahead
Index of Advertisers
The Leader - May/June 2010