M&A Investors Need to Optimize the Real Estate of Companies They Buy and Sell, Advise A&G Co-Presidents

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Jul 20, 2022, 08:26 ET

Private equity firms and other high-level dealmakers can bolster ROI by improving the real estate value and performance of M&A targets, write Emilio Amendola and Andy Graiser in Mergers & Acquisitions magazine

MELVILLE, N.Y., July 20, 2022 /PRNewswire/ -- M&A investors can achieve higher returns by being more strategic about the real estate of the companies they buy and sell, advise the co-presidents of A&G Real Estate Partners in the July/August issue of Mergers & Acquisitions.

In "How to Use Real Estate to Drive Value in M&A," 30-year real estate veterans Emilio Amendola and Andy Graiser note that many M&A acquisition targets have real estate holdings such as leased gyms, offices, clinics, theaters, restaurants, retail stores and distribution centers.

They describe how investors can benefit from a sharper focus on the real estate of the companies they buy and sell:

Optimizing real estate upfront and then clearly communicating these improvements to buyers can allow M&A sellers to reap millions of dollars in additional value at close.
Meanwhile, buyers can use sharper real estate due diligence to maximize these acquisitions after the M&A deal closes. "For example, if the acquisition target is paying above-market rents across its portfolio, the buyer could renegotiate those leases to lock in favorable terms on the best real estate and/or add lease options that confer greater flexibility," write Amendola and Graiser.

They also urge private equity firms and other high-level dealmakers to revisit property-level considerations that may have changed since the pandemic.

In negotiations with landlords early in 2020, for example, many retail companies waived valuable protective clauses in areas such as co-tenancy, exclusives, no-build zones and REAs in exchange for short-term help.

Likewise, some restaurants saw the quality and condition of their real estate deteriorate over the past two years because of deferred maintenance. These properties could be reappraised or repaired, either pre-close by the seller or post-close by the buyer—once again adding value.

In response to rapid shifts in the broader economy and real estate markets, investors could run analytics and geospatial modeling to discover new growth and relocation opportunities for real estate tenants in the M&A company's portfolio, the executives write.

Lastly, many companies have office and warehouse leaseholds that could be subleased or sold.

"A major real estate push may not always be necessary," Graiser and Amendola conclude, "but asking tougher questions is always a smart move."

The full article is available on page 40 at:
https://www.themiddlemarket.com/magazine/2022-private-equity-innovators-in-esc

Media Contact: At Jaffe Communications, Elisa Krantz, (908) 789-0700, [email protected]

SOURCE A&G Real Estate Partners