Does Real Estate and Facilities deserve more focus in M&A Due Diligence?

This topic contains 1 reply, has 2 voices, and was last updated by  Mateusz Młynarczyk 2 years ago.

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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.


    Mateusz Młynarczyk

    An interesting opinion, from Polish perspective it is very important to conduct an appropriate tax due diligence process, especially in the VAT.

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