Mergers and acquisitions: Steps to take with your real estate portfolio

We hear about mergers and acquisitions all the time—some large, some small—and they always seem to come with an air of mystery. Big headlines in newspapers often draw our attention and get us wondering if there will be a monopoly or whether we will ever be able to believe in the true small business anymore.

If you have ever been involved in a merger or acquisition, you probably remember the questions, the waiting and maybe a bit of fear around whether or not your job was at risk. In the current state of the market, attracting and retaining talent is crucial to a business’ success, yet so is growth and innovation. This is why it is critical to have the right team in place to ensure this process goes smoothly.

Mergers and acquisitions require careful planning. Real estate, typically one of a company’s three largest expenses, should not be overlooked in the process. If at all possible, consider the real estate portfolios during the M&A negotiations, not only after the transaction is completed.

Management of a real estate portfolio in an M&A situation typically consists of the following activities that can take anywhere from 1 to 3 years depending on the size and the complexity of the portfolio. The activities involved are complex but generally consist of four main parts:

1. Defining the strategy

What will you do with current real estate? Consolidation and disposition? Keep status quo? Other? Define HR policies and assess the impact on space requirements (e.g. hot desking/shared work stations, work from home, etc.) and reach an alignment on culture and practices before determining real estate needs or changes.

 2. Planning

Mobilize the core integration team (real estate, HR, finance, IT, legal, communications) in order to gather data (addresses, of each site, cost to operate each facility, financial performance/profitability of each facility, headcount and utilization, seat count, clients etc.) and decide which properties will be disposed of or identified for lease termination negotiations. This is where you identify go-to-market strategy and brokerage partners.

During this stage, you’ll also want to address regulatory agency requirements, if any, for consolidation. A change management and communications plan will also be critical to ensure clear and positive messaging in order to retain employees throughout the process. Prepare detailed schedules and track milestones and progress consistently.  

3. Execution

During the execution phase of the process physical moves happen and continued communications and alignment of culture will be key here. This is where you will also begin divestiture of sites no longer occupied and update your real estate and HR database.

4. Evaluation

The evaluation phase will help assess success and opportunities. We recommend creating and reporting on Key Performance Indicators (KPIs) such as:

  • retained employees

  • employee satisfaction/engagement

  • customer satisfaction

  • attraction of new employees/employee growth

  • annual savings and avoided spend

Be careful to remember that the producers in your company are often among those affected and will greatly appreciate being asked and listened to about their experience. Conduct surveys and collect data on consolidated sites to measure KPIs and evaluate progress in order to assess needs for the future.

Change like this requires a team effort, sound strategy and careful planning. Great communication and strong change management cannot be underestimated in terms of importance as a result of any M&A activity. We are here to help. We have managed the M&A process related to corporate real estate portfolios and would welcome the opportunity to work with you, confidentially, through yours—contact our team.