Real Estate and M&A Deals

07 May, 2014

As the economy has improved and credit has become more readily available, mergers and acquisitions (M&A) are on the rise. Many business owners, however, may find themselves unprepared to participate in this resurgent environment.

Those business owners who want to be prepared for a potential merger or acquisition should spend the time to reevaluate what factors drive their business’s growth, revenue and costs—and in turn, profits—especially in the changing business climate following the economic downturn.

Though they are often underestimated, a business’s real estate concerns are an important factor to consider while preparing for a potential merger or acquisition. In the course of valuing their business, owners may consider the value of owned real estate assets, as well as their real estate liabilities (such as a lease or loan balance). However, there are other aspects of real estate that they may easily overlook.

The market value of their real estate assets may be much higher than the actual price at which they could sell them on the market. If the location of the business is especially advantageous for their particular business, and difficult to find elsewhere, an acquiring company may pay much more than the market value. For example, a restaurant that has been located at a certain location for many years may not do as well if relocated. Similarly, a business that is located in a part of town where its ideal customers walk or drive by frequently may also sell for more than the value of other similar structures nearby.

Liabilities may also be lower than they may first appear. For example, a buyer may be more willing to pay a higher price for your business if you have locked in a long-term lease at a favorable rate. Or you may be able to roll over a loan at a low interest rate.

In addition to putting thought to the value of your real estate in advance of a potential M&A deal, it is also crucial to organize all of the documents that are instrumental in demonstrating the full value of your business. If business owners prepares these documents in advance, they will have more leverage in negotiations should an M&A offer materialize, and they are in a much better position to attain the highest possible selling price for their business.

The best way to organize documents for due diligence analysis is in a cloud-based repository that is not only extremely secure, but also easy to use. If you store confidential documents within an organized file structure that also allows you to tag each document with appropriate descriptions, it will make it much easier for potential partners or acquirers to find what they are looking for, and you can restrict access and the ability to print and save to only the people you select.

Moreover, you ideally will be able to identify exactly who has viewed which documents, when they viewed them, and for how long they viewed them, in order to understand which buyers are most interested and why they may be interested on the one hand, or concerned about certain issues, on the other.

With more than 1,000 companies that have trusted its secure document sharing solutions, ShareVault has facilitated billions of dollars in successful deal transactions. ShareVault combines the speed and simplicity of a cloud-based document sharing solution with the security and reliability of a virtual data room.

Prepare yourself early for a potential M&A by taking accurate measure of your assets and liabilities—real estate included—and by organizing all of the documents a potential acquirer would want to see before the offer comes along.