4 months ago
11
ARTICLE AD BOX
By Bobby Magnano, Vijay Jesrani, and Sam Franklin
After decades of significant changes to financial regulation, including greater oversight of large financial institutions, financial services mergers and acquisitions (M&A) is poised for a comeback. More than 60% of financial services organizations identify revenue growth through expansion, M&A, and penetration of new markets as critical corporate objectives over the next five years, according to JLL’s Financial Services M&A research.
If M&A is on your institution’s radar, equipping your corporate real estate (CRE) function with the ability to mobilize quickly prior to due diligence will be critical to your success.
Real estate is the second-largest expense for most financial services companies, so CRE integration invariably has a material impact on M&A outcomes. Because CRE touches nearly every aspect of a financial services business, from customer interactions to back-office functions, engaging the CRE team early will help your organization realize more value more quickly from a merger or acquisition than it might otherwise.
Ideally, your organization will establish a well-rounded corporate real estate team long before a merger or acquisition is actively under consideration. With access to data and analytics tools, skills, and expertise to plan the post-merger CRE integration, the CRE team can hit the ground running after close.
Missed opportunities for real estate
Leaving CRE out of the M&A enterprise transformation and due diligence process, or bringing CRE in too late, creates the risk of major, and potentially costly, integration gaps. The organization might invest in a branch renovation shortly after the transaction closes, only to discover that the branch will be closing within the year. Or you might renew a lease for space you don’t need, or accept poor lease renewal terms because expiration is unexpectedly approaching.
By considering the CRE portfolio too late in the M&A process, an organization risks leaving millions of dollars in savings on the table. A lack of real-world occupancy insights could result in underutilized space, or not enough of the right kind of workspaces to support the fluctuating headcounts of a hybrid workforce. Deferred capital projects may suddenly become urgent—and cost more than necessary—due to lack of coordination.
Leading Canadian bank exceeded targets in merger
A major Canadian multinational bank recently agreed to acquire a regional U.S. bank for $16 billion, the largest such acquisition by a Canadian bank. The Canadian bank established a merger synergy target of 40%, translating to a $25 million cost-savings target for the CRE team.
The bank engaged JLL Consulting during the planning and due diligence phase. Continuing through deal close, JLL supported the pending integration of 4.2 million square feet in nearly 600 office and retail sites across the U.S. to align with the bank’s growth strategy.
Comprehensive data integration, including cleanup and reporting, was a critical factor for meeting cost-savings and synergy goals. Early in the integration process, the CRE team collected, collated, and cleansed the acquired bank’s real estate portfolio data to develop a clear cost baseline. Then, the team merged the data with the acquiring bank’s portfolio data to create holistic data visualizations of the combined CRE portfolio and ensure alignment with the Canadian parent’s business strategy.
The CRE team reviewed the combined portfolio for opportunities and preliminary synergy strategies. Strategies were segmented by size, geography, savings timeline, and capital requirements to meet reporting deadlines established by the Canadian parent’s Integration Management Office (IMO).
With data in hand, the team developed the integration business case and validated scenario feasibility. JLL worked across business and functional teams to rapidly develop business cases and support plan approvals prior to Legal Day 1, to ensure that the bank could begin executing approved synergy strategies immediately upon deal close. Meanwhile, the CRE team created executive presentation materials to support business leadership and IMO meetings.
By considering the CRE impacts of the M&A early in the transaction, the bank accelerated the integration of the combined businesses and captured millions in synergy savings and efficiency gains. Results included:
- $24.5 million in total synergy savings identified for the corporate office portfolio
- Anticipated annual cost savings of nearly 50% for the corporate office portfolio, including approximately $7 million in savings in the first year
- A 40% reduction in the company’s rentable square footage
- A structured program management office and integrated CRE team that consistently delivered results on time and exceeded targets, achieving synergy savings targets within one year of deal close
Creating the right M&A team
No company can afford to leave value on the table in a merger or acquisition—and the CRE portfolio can be a critical factor that makes or breaks the success of the deal.
Adding a real estate advisor can equip your CRE team with skills, technology, and expertise to uncover hidden portfolio risks and value that matter to investors. In the chaotic M&A environment, an external service provider can leverage data for the rapid evolution of scenario planning and strategy while the organization continues business-as-usual operations.
With a proactive, well-rounded CRE team, you can act quickly to align the CRE portfolio with business strategy, implement the integration plan, achieve synergy savings, and create long-term value. Having the right real estate in the right locations can shape the culture, talent, costs, and performance of the newly integrated organization.
To learn five keys to leveraging corporate real estate during M&A, download JLL’s M&A Guide here.
Bobby Magnano is the Global President of JLL Financial Services. Vijay Jesrani is a Managing Director for JLL Consulting. Sam Franklin is a Senior Director for JLL Consulting.
English (US) ·