Jul 19, 2016, 4:45 PM
Tech is the busiest sector for mergers and acquisitions right now, and activity is only projected to grow.
On June 13, Microsoft announced its plan to acquire LinkedIn. And pay for it in cash.
In just the first six months of 2016, about $260 billion of tech deals were announced globally. Tech is hands-down the busiest sector for M&A so far this year (sub); it was last year; and it doesn't seem to be slowing down.
LinkedIn, whose stock had fallen about 40% from the start of the year, saw a 47% boost when the deal was announced. The stock has remained steady since. (Microsoft saw a slight dip after the announcement, and another after Brexit, but has bounced back to pre-announcement levels.)
Many big tech companies have lots of available cash, while valuations are falling—or at least being questioned—for up-and-comers. In this environment, there’s a fair amount of speculation that now is a good time for VCs and other tech investors to exit holdings.
What does this mean for your tech company if you’re looking to acquire or merge with another firm?
A lot, really, and we aren’t the experts to walk you through all the financials, legalities and other complexities. But we are the experts to walk you through one aspect of M&A activity that’s often overlooked—and can save you a lot of time, money and headaches if you get it right: Real estate.
No matter what side of an acquisition you find yourself on, you can help ensure a successful agreement by understanding real estate’s role in it. Not only are there financial implications for both companies—from leadership and investors to shareholders and stock—but there are also real, day-to-day implications for your employees.
Get to know your real estate, and its hard and soft costs and value. This will smooth any impending M&A process later on.
1. Know what your real estate is worth
Due diligence is the first phase of any M&A agreement. It’s where both companies assess the strategy and potential benefits of the transaction, and where value is most scrutinized so the buyer knows they are getting the best deal.
When both sides understand their real estate assets and holdings, you can identify synergies, arbitrage opportunities and risks in the complete portfolio. A preliminary integration plan begins to take shape before transaction close. This can increase acquisition price flexibility and uncover potential cost savings earlier in the process.
2. Understand where your space is, what its role is, and how your people use it.
You know the hard costs and financial impact after completing the due diligence above, but what does your complete portfolio actually look like? What about the company you’re combining with?
Often, M&A activity uncovers duplications of real estate assets—like multiple call centers, locations for back-office operations and unnecessary sales offices—that can be consolidated.
Additionally, take a moment to reassess your real estate needs. How are you currently using space? What about the company you’re joining with? How does the space support the vision of the combined companies?
It’s rare in an M&A situation not to find opportunities to improve space utilization to uncover cost savings, enhance productivity or both. Think about how business units are organized at each company. What’s working well? What doesn’t work so well? Are there opportunities to create new synergies?
3. Recognize that your culture makes your company uniquely you.
Perhaps most crucial to your employees—your talent—is the feel of the workplace itself. Whether you’re acquiring, being acquired or merging with another firm: You’ve built a brand and culture that’s unique to your business and its people. And now it’s got to meld with someone else’s.
Done well, you can use rebranding, rebuilding and/or redesigning space as an opportunity to connect with all employees and build loyalty during this pivotal transition. For example: When JLL acquired Cresa in Portland, we took a culture-first approach to ensure that the new office would create a productive, comfortable workplace for all.
Ask employees what they like and don’t like about their current environment. Find out what they’d like to see in a new space. Communicate openly and often about location and design choices you’re making—and be sure their input is a part of it.
At the end of a successful integration, all parties should be pleased with the transaction and transition: On both sides of the deal, from the top-down and from the bottom-up. Getting the real estate part of the equation right at all phases of the process is crucial to achieve this ideal outcome and achieve your objectives.
Author: Edward Connolly | Editor: Laurel Miltner