Does Real Estate and Facilities deserve more focus in M&A Due Diligence?
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While Real Estate may not warrant the attention other groups or back-office functions receive during the due diligence and integration, failure to properly review real estate documentation, spend and accurately report on these areas may prove costly, and more importantly have a direct impact on the successful integration.
A focused Real Estate team (or individual) able to review Lease-hold rights, environmental surveys, facilities expenses, etc. to identify risks associated with a potential transaction can be invaluable. What assignment/change of control rights does the target entity have? When is notice required and what is required to accompany the notice to ensure lease obligations are met. A material lease that does not permit an assignment without Landlord’s consent can create a snag in the entire process. In the case of a divestiture, are the proper TSA’s in place to ensure a seamless transition to another office and do these TSA’s align with other functional TSA’s? This can be especially important in Asia and/or parts of Europe where relocating an entity or its employees is fraught with tax and regulatory limitations. Engaging a real estate lead who understands these dependencies, or who understands enough to ask the right questions early on, is important.
Consider office synergies. Understanding the ‘lay of the land’ in a target company’s headquarters and how its employees can seamlessly integrate into a new environment in the case of a consolidation, ensuring that comparable amenities are in place are just a few examples of the important role that a qualified Real Estate and Facilities team owns. And where synergies do exist accurately quantifying savings realized from a consolidation can be tricky. When planning for these synergies, what kind of reviews are happening to ensure a consolidation is feasible?
These are of course only a few thoughts on the importance of having a dedicated and qualified real estate and facilities professional involved in the due diligence process. Every acquisition is unique and will bring with it new challenges.
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