A new calculation has emerged to validate M&A deals, well so say Tim Armstrong and Arianna Huffington following AOL’s $315 million acquisition of The Huffington Post. The deal, while not extraordinary in terms of price, is significant for other reasons.
First, it represents perhaps the first headline grabbing M&A of 2011 – a year in which most analysts predict an M&A boom as leaders are willing to invest in smart growth after a period of introspection and caution.
Secondly, this tie-up points to an inorganic growth trajectory for the tech sector, with mergers actively being pursued to drive diversification, enhance innovation, and obtain access to new delivery platforms and hence new markets. Other tech companies, and sectors, will follow suit.
Thirdly, and tellingly, the key protagonist – AOL – still bares significant scars from ‘expansion’ by M&A. The $164 billion “merger of the century” of Time Warner in 2000, lasted 9 painful years and has been described as ‘the biggest mistake in corporate history’ by the chairman and chief executive of Time Warner. One assumes AOL’s description of the experience would be little different. But they have returned to the fray.
In some ways the deal has real estate at its heart. It is about gaining entry to homes and offices across the US: The Huffington Post addition can provide access to more than 100 million US based visitors every month.
However some more direct real estate issues will also emerge: First assessed in our 2007 white paper “M&A: Maximising Opportunity, Reducing Risk”, the paper remains relevant with its five roles for corporate real estate teams:
1. Supporting and informing the due diligence underpinning the transaction and determining price
2. Improving the speed, efficiency and effectiveness of integration
3. Assisting in minimising operational and financial risks pre and post integration
4. Ensuring the revised real estate portfolio is fit for purpose, has a common standard of quality and appropriate working styles
5. Enabling the business to maximise capital release from surplus (and in some instances operational) real estate
So yet another set of challenges await the CRE profession! I can almost hear the sharp intake of breath from here…
…Take a look at our paper; it might just help you rise to the challenge.