From our Thought Leader Contributor, EY.

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Michael Golichowski and Nicholas Tatro, Ernst & Young LLP

Real estate is a critical component to any corporate transaction. Just as IT, HR and finance are important functions that require consideration early in the negotiating process to help ensure business continuity, real estate is a piece of the M&A puzzle that needs to be discussed early and often. The value of doing so becomes apparent as leaders evaluate synergy targets and develop strategies to optimize the future of the company in whatever new form it will take.

Dealmaking can – and often does – become complicated. When companies engage in transaction activity that involves different business units and real estate properties, issues tend to arise as to property ownership/responsibility. These days, most companies have adopted a very active M&A and divestiture type of mindset. They are taking a hard look at their non-core assets and evaluating them for viability to spin off or carve out to drive value. Often, these assets are determined to be worth more as a stand-alone business than as a subsidiary.

Delaying the conversation about all these variables, and about what will change with each company’s real estate portfolio through M&A activity, is a substantial risk. Proactive analysis of real estate synergy and separation costs can help both the buyer and seller avoid headaches, and ultimately deliver a better outcome for both sides.

Here are four points in time when real estate analysis is pivotal in the dealmaking process:

The targeting process: If you think about the overall transaction process, it starts at eye level, almost from an outside-in perspective, as you look at the value of the deal. Even before data is shared from a seller to a buyer, the buyer can benefit from understanding potential trapped real estate value that other buyers may not be considering. Real estate is historically a fragmented area within the business. Leadership will make decisions about the real estate that is needed, and the corporate real estate group becomes almost an order taker, someone to go out and find that space. And so, in the context of a business transaction, it’s natural over time to have entangled sites where multiple businesses use the same space. Take the time to conduct due diligence upfront, early in the transaction lifecycle, to understand the deal perimeter and what will need to happen to operationalize the vision of that transaction.

During negotiations: Real estate guidance provides perhaps its greatest value at this stage, before the deal has been finalized. It’s easier to make changes and address concerns here, rather than later when many points are thought to have been settled. As both parties are negotiating and sharing information, it’s important to establish data credibility. If information is flawed or sourced from a high-level point of view that doesn’t account for key details, concerns will arise. Real estate advisors can help identify accurate datapoints, as well as isolate risks and explore opportunities that need to be considered not only in terms of setting up real estate for success, but also the company.

Before closing: Value creation and risk mitigation strategies such as reducing facilities management costs can be modeled, and sometimes even executed, before the deal is finalized. This is true in the case of tax-free spinoffs, as well as when a company is divesting a business unit where there is no third-party buyer. An important tenet for all transactions is speed to separate. So often, companies are focused on executing the transaction, and there are opportunities for optimization that are missed, which could be acted upon throughout the transaction process. Speed is important, but don’t let it get in the way of a better deal outcome.

After day one: This is commonly when commercial real estate advisors are used. Unfortunately, it’s also when the value opportunity is at a low point. It’s akin to building a house, but not bringing in heating, ventilation and air conditioning until the house is nearly complete. Bringing in real estate expertise early and often helps transaction partners extract the most amount of value from the deal.

While these four points in time are pivotal in the life cycle of a transaction, there will surely be surprises and unexpected developments that require you to adjust your timeline. Here are some other things to keep in mind from a real estate perspective as you work through the process:

  • The personnel side of dealmaking – Real estate is a value lever and a major cost in most organizations. It can also be an emotional topic. In today’s environment, as the workspace continues to evolve, it’s good to be mindful of the organization as a whole in terms of its needs and the way people work. It’s often said that the No. 1 reason M&A transactions don’t work is culture. It’s critical to have workplace strategies in place to think about the deal from a personnel and cultural perspective. Time needs to be taken to define what the space will look like and to help ensure that when separate cultures come together under one roof, they can not only co-exist, but thrive.
  • Change management – Not many companies are designed and put together within a very short 12-month window. You have new leadership and a new vision. It’s critical to think through that change element, the change management that is going to occur. Think about how to drive decision-making and all those strategic underpinnings that need to be evaluated. The organization itself has to be set up and that site-by-site actioning has to take place to determine what’s best for the enterprise, and what’s best for the stand-alone business.
  • Guiding principles A strong and deliberate governance model can facilitate some nimble decision-making and deal progress. Often the timetable is tight for a lot of these deals, so there is a lot of work that needs to be performed in a very tight timeframe. A set of mutually agreed upon guiding principles can create a framework to get these items done quickly and efficiently. Informed decisions are made, guiding actions that can bring the parties closer to an approved deal.
  • Transitional service agreements (TSAs) – Real estate professionals will typically work with you to identify sites that will be more difficult to separate. Sometimes the timeline for separation just doesn’t match that of the actual transaction. So, you need a TSA to buy you enough time to truly and completely separate that particular location. A real estate professional will help identify complex sites early on and the big hurdles that will need to be overcome. The goal is to minimize the length or duration of those TSAs, which can all be impacted by higher level guiding principles that are set by the overall program during a transaction. The key is early identification and prioritization of difficult sites in advance.


The transfer of real estate through M&A activity often involves a lot of moving parts. But it doesn’t have to be complicated. Here are three key points to keep in mind:

  1. Real estate needs to be part of the M&A conversation from start to finish.
  2. Set up internal processes and guiding principles to help inform how decisions are made.
  3. Don’t let your efforts be slowed down by poor information.

More information is available at

Michael Golichowski, EY Americas S&T Corporate Real Estate Transaction Services Solution Leader, Ernst & Young LLP.

Nicholas Tatro, Senior Manager, Corporate Real Estate practice, Ernst & Young LLP.

The views expressed in this article are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.