Q1_2013_CVRS_VIEWONLY

Andrew Zezas, SIOR Learn more about the author www.CFOstudio.com/AndrewZezas 28 WWW.CFOSTUDIO.COM 1st QUARTER 2013 CORPORATE REAL ESTATE W hen your company is actively engaged in M&A transactions, especially acquisitions, all eyes are on you as CFO, and you’re expected to accomplish a lot. You must move quickly, protect the company, be mindful of transactional op- ponents, manage service provid- ers, mitigate risk, enhance ROI, successfully complete due diligence, and close the transac- tion. Even before you complete the deal, you will address numer- ous short- and long-term issues, such as the likelihood of its success, future exit strate- gies, and more. Your CEO, board members, and other stake- holders will be watching closely. M&A deals move very quickly. Buy-side transparency during due diligence continues to be one of the greatest challenges. Despite your team’s superior efforts, you may not uncover all the risks and opportunities contained in an acquisition until after it closes. In most cases, the integration phase or sometime thereafter is when buyers confirm whether or not their transaction achieved the objectives for which it was intended. This is much too late to make such an important determination! During due diligence, leased and owned real estate are most often reviewed on little more than an environmental, compli- ance, or administrative basis. Typically, not much attention is paid to business risk and opportunity related to real estate until post-closing. By then, opportunity is greatly diminished or eliminated, risk has like- ly grown, and negotiating leverage has all but disappeared. Waiting until integration to conduct a broader examination of real estate transaction structure could endanger underlying prof- its, unnecessarily increase risk in both financial and strategic acquisitions, and result in missed opportunities. To the surprise of many execu- tives, beneficial results are easily and quickly attainable—during due diligence. Assessing Business  Opportunity and Risk Even before entering into due diligence, prudence strongly suggests that you, as the senior finance executive responsible for the success of your company’s M&A transaction, answer these questions: 1 Have we identified the most challeng- ing business risks that may be hidden in leased or owned real estate that will accompany the acquisition, and have we determined how to best mitigate them before closing? 2 Have we identified profit opportunities locked in real estate that can be un- locked during due diligence? 3 Have we structured the acquisition to adjust for the realistic costs and unknown challenges associated with disposing of sur- plus real estate after closing? 4 Could the acquisition become more valuable if we could leave some of the real estate behind or eliminate it from the transaction before closing? 5 Could renegotiating the terms of leased real estate before closing generate more profits and reduce risk? Maximizing Leverage and Flexibility, Reduc- ing Risk, and Capturing Profits When it comes to M&A, the great- est real estate leverage exists during due diligence.Interestingly, the relativity, rate, and intersection of Risk, Opportunity, and Leverage (Opportunity Quotient) can vary greatly from acquisition to acquisition, based on many factors. By employing an intelligent, time-sensitive approach to leverage and flexibility maximi- zation during due diligence, CFOs can en- hance buy-side transparency, identify and capture business opportunity, uncover and reduce risk, and generate substantially greater value during the early stages of an acquisi- tion — and most often go to the closing table with a better deal and greater profits! C VISIT WWW.CFOSTUDIO.COM FOR SIX MORE QUESTIONS CFOs SHOULD CONSIDER IN AN M&A DEAL. www.cfostudio.com/corporaterealestate DUE DILIGENCE INTEGRATION Real Estate Risk, Leverage and Opportunity in M&A Transactions Capturing Opportunities in M&A Transactions