M&A bonanza in 2014?

Towards the end of 2013 we released a short paper: The return of M&A: Property Implications highlighting our belief that foundations are in place for an upturn in M&A activity in the year ahead.

This view is rapidly gaining currency. Hardly surprising given what happened on what some are calling Mega Monday whereby half a dozen deals totalling more than $100 bn (£61 bn) were revealed, starting 2014 with one of the biggest flurries of M&A activity in years.

The deals announced span several industries and three continents and included the third largest bid for a company since 2009 (Charter Communications offer to buy Time Warner Cable for $61 bn.

An article yesterday’s FT quite rightly points out  that one swallow does not make a summer and this early spike does not necessarily herald the start of an M&A boom.  However, that being said, the signs are there: business surveys showing corporates more prepared to take risk onto the balance sheet, low interest rates, macroeconomic stability, strong corporate balance sheets and a banking sector keener to lend.

If activity does increase, as I personally anticipate, then it will be important for management to consider Corporate Real Estate (CRE) and workplace strategies which will help mitigate risks and maximise opportunities. M&A can cause both operational and personnel disruption, so early involvement in the process for CRE teams is important.  There needs to be an awareness that M&A often leads to a clash of cultures, approaches and resources in CRE teams which can be destabilising and slow progress at a time of great opportunity. A CRE team needs to have a wide range of considerations once an M&A deal is completed, such as: identifying good quality data, true costs of overlaps in portfolios, necessary accounting provisions and considering whether the combined portfolio is fit for purpose in the new organisation. A comprehensive real estate plan is necessary, which CRE teams can implement upon completion of the merger or acquisition.

Looking forwards – whilst ‘mega Monday’ was exceptional – I believe the key ingredients are in place to drive further momentum.  It is certainly an interesting time and I will be keenly following developments in the months ahead.