For buyers of companies in a world awash in capital, the prices of target deals are often bid up. Buyers need to examine the real estate portfolio of any potential acquisition as a way to improve profitability and pay down purchase equity. Real estate is the largest off-balance sheet liability but historically, private equity firms have focused their cost cutting on labor expenses or the cost of goods. However, the most savvy private equity players realize that lease obligations in many cases are a greater amount than loan liabilities thus of great importance.

It is not uncommon for companies to undervalue their real estate in regulatory filings, so there is the possibility that real estate assets could be worth more. The differential in valuation often attracts activist investors who claim that a company's real estate is worth more than what filings indicate.

The best performing PE firms look at opportunities to quickly monetize real estate assets through a REIT offerings or a sale-leasebacks to recover whatever equity has been invested. McGowan is a trusted advisor in this space.

McGowan serves as a powerful advisor to help a private equity investor avoid overpaying for an acquisition. By analyzing the lease obligations and owned assets, buyers may find reasons to discount a deal or, alternatively, raise the offer. McGowan excels at structuring scenarios where properties are liquidated in concert with their strategic importance.

Mergers and Acquisitions

McGowan provides strategic real estate advisory services to facilitate corporate change. As part of the process, we specialize in asset componentization of nonstrategic real estate. This materializes in partnerships in which McGowan acts as a co-investor or as an agent, offering brokerage services and auctions for the sale/leaseback of core properties, sale of nonessential owned or leased properties.

McGowan can partner with clients as they value and acquire businesses, maximizing the value of new locations, and assisting in the work and expense of disposing unwanted assets. We have deep experience in lease restructuring to minimize liabilities and maximize value in connection with core leased locations.

McGowan can provide or arrange the capital necessary to purchase unwanted or duplicative assets (for example, going-concern divisions, real estate, excess and obsolete inventory, FF&E, etc.). The client takes only the locations and related assets it wants, thereby reducing acquisition costs and streamlining its balance sheet. The client’s management can focus on the go-forward business, while McGowan handles the disposition of unwanted and duplicative assets.

We offer the experience to successfully handle all situations, and we integrate seamlessly with your operations, real estate, and legal staff. McGowan can facilitate your M&A transaction by reducing equity requirements and handling the real estate repositioning and/or disposition process.