In addition to getting $150 million at closing, Spaulding & Slye will get $20 million two years later and another $15 million after three years. The company's current owners have a chance for additional money through an earn-out based on the performance of both companies' operations in Boston and Washington, DC over the next three years.
"We only have a limited presence in Boston, and it's a market we've targeted for growth," said chief executive officer Colin Dyer during a conference call Monday. Meanwhile, both companies have a work force of 200 each in the Washington, DC market, which Dyer noted is "one of the fastest growing commercial real estate markets."
The two companies have talked about a potential merger for a few years, Jones Lang LaSalle chief executive officer for the Americas Peter C. Roberts tells GlobeSt.com. "From Jones Lang LaSalle's side, we have admired Spaulding & Slye's business, their culture and the platform they've built for a long time," he says.
However, talks about a joint future heated up in recent months, Spaulding & Slye president David McGarry tells GlobeSt.com. McGarry will oversee operations in New England and Washington, DC market. Spaulding & Slye chairman Jim Karman, chief financial officer Peter Bailey, chief investment officer Marshall Durston and New England regional director Kyle Warwick will remain in key positions with Jones Lang LaSalle. "The top management will have a key role in the organization," said chief operating and financial officer Lauralee Martin during the conference call.
While mergers typically involve a degree of angst, McGarry tells GlobeSt.com he and his company viewed Jones Lang LaSalle as its top, and nearly exclusive, choice for a partnership. "I'd had the benefit of being involved in the process, and yes, it's been a terrific run. I've had 21 years at Spaulding & Slye," he tells GlobeSt.com. "We've accomplished a lot. But the thing that is helping a lot of people is, we've always had a great admiration for the brand of Jones Lang LaSalle."
The merger increases Jones Lang LaSalle's worldwide payroll to nearly 20,000 and gives it 915 million sf, worth nearly $30 billion, of assets under management. Jones Lang LaSalle is paying the $150-million price by tapping its revolving line of credit.
While declining to provide specific figures, Martin says about half of Spaulding & Slye's revenue comes from leasing and brokerage, with the other half spread over construction and development management, finance, investment sales and management. However, Martin disclosed the deal is at less than Jones Lang LaSalle's current ratio of 11 times earnings before interest, depreciation, taxes and amortization, which would put Spaulding & Slye's profitability in the neighborhood of $20 million a year.
Spaulding & Slye's assignments office leasing assignments include the proposed 1.5-million-sf One Town Center in Suitland, MD; the 1.1-million-sf World Trade Center East and West buildings in Downtown Boston as well as the 731,204-sf 99 High St. in the same submarket; and the 611,047-sf Victory Center I in Alexandria, VA. However, Spaulding & Slye recently lost the job as office space leasing agent for the proposed $1.2-billion Fan Pier project in Boston, the result of the 21 acres being sold to Fallon Co. Spaulding & Slye also is involved in investment sales and development management. Spaulding & Slye's work also includes projects for colleges and universities, including Harvard. "Spaulding & Slye's higher ed specialty is really quite special," Martin says.
Roberts suggests to GlobeSt.com the merger not only is along geographic lines, but in specialties as well. Jones Lang LaSalle picks up Spaulding & Slye's client base in life science and law firms, among others, he notes. "We can leverage that across our client base," he adds.
Jones Lang LaSalle used Banc of America Securities as financial advisor while Piper Rudnick Gray Cary provided legal advice. Covington & Associates worked as Spaulding & Slye's financial advisor with WilmerHale providing legal advice.
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