Mergers and Abdication

As a corporate real estate manager, you may be looking at recent merger news and activity in the real estate outsourcing industry and wondering what increased market share, synergies, savings and customer service improvements a merger of industry giants might make. Well, here’s my take on it. Increased market share Depending on whose statistics you believe, the real estate outsourcing market is growing at a rate of 10% to 20% per year. Keep in mind that this is across the entire spectrum of corporations, not just the Fortune 100. If we narrow the focus to Fortune 100 companies alone, I would venture to say the growth rate is 5% to 8%. And the largest providers are relentlessly and explicitly pursuing that slice of the pie which, while growing, is creating commodity-styled pricing pressure. This means to truly increase market share, you have to tap new markets, create new markets and develop new services.

SynergiesI won’t name names, but I know a company that calls itself by one name but has never stopped being a collection of remnant companies from the glory days of the Reagan-era. The amount of redundancy inherent in that organization is a huge challenge, but there’s little that can be done. They tried and failed. Merging company names is one thing but merging cultures is something entirely different. We still have a deep seated need for identity and we will do whatever is necessary to preserve it. Thus, in today’s age of modernity, we still have corporations whose divisions use two different accounting systems and whose corporate real estate operations can never be centralized without causing a riot.

SavingsIf two entities merge that are geographically dispersed, with little or no historical overlap in the scope or strategic direction of their business, then I can agree to the concept of purely merger-related savings and greater efficiencies. However, if two competitors merge, and each is in the other’s sandbox to begin with, the merger was never one of creating synergies but one of eliminating a threat. In this scenario, savings can only come from one source–staffing…and by that I mean a reduction thereof.