The inside story of the $613 million merger of Jones Lang LaSalle and Staubach.
As the 33,700 employees of Jones Lang LaSalle and the Staubach Co. began to integrate this summer and work as one team, they emerged as a new global powerhouse of real estate services. Their merge this summer, according to leadership from both sides, is not about being the biggest, but about being the best, about combining strengths and offering more real estate solutions.
It’s a marriage that has long seemed destined to happen, even if talks between the firms only began in earnest early this year. The real estate giants have competed for years not just for business, but for employees. Jones Lang LaSalle, a multi-faceted, global real estate service based in Chicago, and Staubach, a nationally entrenched, tenant-focused Dallas firm, crossed paths plenty over the years.
“We knew a lot of the same people, we tried to recruit a lot of each other’s people, and the reasons we would try to do a lot of that is because we found the people to be culturally similar and very high quality professionals,” says Greg O’Brien, former Staubach CEO and now CEO of Jones Lang LaSalle’s new America’s Brokerage.
“[There was] not a lot of success in either camp at getting people to leave, because we had great cultures and people were very happy with what they were doing. But we had a whole lot of respect for the other side.”
The Strategy Emerges
For Staubach, the strategy that ultimately led to merger talks with Jones Lang LaSalle came about a few years ago after a period of competition and self-analysis. O’Brien recalls that the firm, founded in 1977 by NFL Hall of Famer Roger Staubach, was already a leader in tenant representation in many major U.S. markets, with revenues at about $350 million at the time. But it foresaw itself lacking in certain areas in the face of an increasingly global economy. Many of its 3,000-plus clients, big and small, wanted a broader range of services, including help in countries abroad, along with better tools and access to other real estate solutions. Clients sought to acquire, dispose of, and generally be able to deploy real estate in ways that could make their businesses more successful.
“What we were finding was that our clients wanted a single global brand, and the ability to deliver with what they perceived was strong control over the quality of what you had everywhere,” O’Brien says. “They wanted a more robust service line. They wanted a scale capital markets business so they could have a better sense and get more help from us in those areas. They wanted a scale development, design and construction business. … They wanted infrastructure and technology to help them with their portfolios on the accounts and corporate solutions side, and many other things. They wanted more scale where possible, and to be able to make sure that we could bring all that together.”
According to former Staubach President John Gates, now America’s Brokerage president with the merged firm, the company realized it needed to make a move to better serve its clients. Expanding its platform and gaining a global presence, though, “was going to take a lot of time, a lot of investment,” Gates recalls.
Board-level discussions at Staubach honed in on where the firm wanted to be in five years, and how it could get there. O’Brien notes there were many alternatives for building up the desired service lines.
“In looking at that, one thing clearly came out, that Jones Lang had a fabulous culture, and a similar approach to business, and they had scale and had come up with solutions in the areas that we felt like we needed to grow and have strength. And some of those areas, like international, like capital markets, like facilities management, really required scale, and they had gotten there,” O’Brien says.
Tenant Market Targeted
Jones Lang LaSalle, whose roots go back more than two centuries, had developed a leading, international real estate solutions business across multiple service lines, with more than 170 offices in 60 countries, and a 2007 revenue of $2.7 billion. It had the tools and infrastructure that Staubach wanted. On the other hand, Staubach, whose last fiscal year revenues were $375 million, had a competitive edge among large and mid-size office users in the major U.S. markets. As Jones Lang LaSalle sought to deepen its tenant representation positions in those markets in recent years, it made sense to consider a merge, and Staubach, a longtime competitor in this area, emerged as a logical choice, says Bill Krouch, the firm’s CEO of Markets.
“As Jones Lang LaSalle began to build a robust local-markets tenant representation capability, it became apparent that a business combination with the Staubach Company would accelerate and significantly improve our competitive position in this segment,” Krouch says, noting that his firm had long admired Staubach’s work and even had conversations over the years about a potential business relationship. Jones Lang LaSalle clients and prospects would even mention similarities between the two firms, specifically their cultures of teamwork, professionalism and ethical standards.
O’Brien recalls finding very quickly that the two firms “fit together hand in glove.”
“We made the decision after much deliberation and meeting with the Jones Lang people and understanding their culture and their people better. We thought, ‘Boy, this is a really great cultural match.’ The people are people that our team has said we would have hired every one of those people. They’re like us, they think like us, they’re very client-oriented, they’re very team-oriented,” O’Brien says.
The deal came to fruition, quite rapidly, as 2008 unfolded. Business terms were agreed upon through a letter of intent, followed by three months of due diligence and development of integration plans.
“We actually started integration discussions at the end of the first quarter of this year, beginning to workshop how we could bring our teams together in each of the various geographic markets,” Krouch says. “We’ve done a lot over the last several years to leverage the knowledge we learned from previous mergers, like with Spaulding & Slye [in 2006]. One of the things we found is you have to appoint integration teams that pull resources from both sides of the ledger and focus them on the areas you have to integrate. You also start that process well in advance of when you’re going to close, so that when you close you’re really in an execution mode.”
The transaction has Jones Lang LaSalle paying $613 million for Staubach, including $123 million in cash and assumed net liabilities, and $100 million in stock at closing; and $390 million paid out in cash over five years, for all of the outstanding capital stock of Staubach Holdings Inc. An additional $114 million in earn-out payments will be paid over four and a half years, provided certain performance measures are met.
The Deal is Closed
The firms closed on the deal in July, with the new firm operating under the Jones Lang LaSalle brand, and Staubach’s leadership taking key positions in the combined organization. Roger Staubach, now executive chairman, Americas, is actively involved with client relationships, new business development and strategy, and works closely with Colin Dyer, CEO, and Peter Roberts, CEO, Americas, as well as O’Brien and Gates. O’Brien refers to Roger Staubach as a beacon for the other executives and professionals.
“Roger’s very committed,” O’Brien says. “He’s asking the questions about how we can get better, even though we’ve gotten so much better together. ‘How do we do this, how do we do that?’ It has him very excited to take this thing to the next level. He’s going to be supremely engaged. I’ve never once seen him not energized, but with this he’s very, very focused on making sure it works for everybody, including our clients and our partners at Jones Lang LaSalle.”
As the companies integrated, its leaders had to face issues such as how to address overlap in markets, as well as in employee functions and physical space. Staubach added more than 1,000 employees and 14 corporate offices to Jones Lang LaSalle, which previously had 54 offices in the Americas. (It now has 184 offices worldwide.) New office locations are in Austin, TX; Bethesda, MD; Cincinnati, OH; Walnut Creek, CA; Fort Worth, TX; Kansas City, KS; Las Vegas, NV; Memphis, TN; Murray Hill, NJ; Oakland, CA; Reno, NV; San Antonio, TX; Tallahassee, FL; and Tampa, FL.
One of the biggest challenges of combining operations, Krouch says, dealt with space occupancy and putting offices in a given market under one roof, and doing it seamlessly so as not to affect the brokers or disrupt business. Executives from both sides made it a priority to get their teams together, partnering on an integrated business model. There were many areas where the firms had crossover, so it became a priority to focus on the physical space challenges even before the firms announced the merger. Gates notes the importance of seeing that people with similar functions be in the same location. Where he works, in Dallas, for example, offices will be combined and in seven months Jones Lang LaSalle employees will be in one building.
“We’re working to say, ‘The legacy brokers from both firms, let’s get them in the same building, and let’s get capital mortgage folks in the same building, and let’s get folks who are doing project management in the same building.’ And then let’s also say, ‘What adjacencies do we need to have amongst those groups—project management folks, at least some of them work closely with the brokers, so let’s try to have the project management folks in the same building.’ We’re shooting some folks down the street and bringing other folks back up the street,” Gates says, adding that the firm has leases expiring in certain markets, and the company will sublease space as needed as it moves people around.
According to O’Brien, overlap in terms of people was not a major problem. Where the firms did have brokers from both sides in the same place and function, the firm sought ways to bring them together to create new opportunities. It helped that the companies had different business models, with strengths that were seen as complementary.
“There really wasn’t, ‘You have five leaders in this certain business line, and so do we, it’s going to be a big overlap,'” O’Brien says. “We had some overlap, but in every case, we’d sit down, work it out. The natural places for leadership and growing and ideas like that all came out of our respective business models, which are melding pretty well together.”
Krouch sees the integration as simply enhancing and improving competitive position. As a combined force, Staubach’s business is being introduced to Jones Lang LaSalle’s corporate solutions capabilities, facility management services and other business lines. And the latter firm benefits from Staubach’s broad U.S. market presence.
“We have a broader platform and more tools that we can present to our clients, and do more things to service them, and the prospects as well,” Gates notes, mentioning facilities management and capital markets capabilities as examples. “So, we can do more, we can deliver more, we can provide even better service. Interestingly, on the Jones Lang side, they had some great relationships in some cases with large corporate clients where they weren’t doing much of the transaction work, and in some cases not any of it, and that’s our fastball. So that’s a great fit there.”
Companies such as Procter & Gamble, a longtime corporate solutions client of Jones Lang LaSalle’s, for example, are now in discussions to use the merged firm for brokerage transactions. Meanwhile, some of the major oil companies in Texas that did business with Staubach were meeting with the firm this summer to discuss expansion both in terms of geography and in service lines such as facilities management. Gates notes that the company can now offer “an integrated technology solution that really brings a holistic view of [a client’s] entire real estate portfolio to the desktop.”
Among the stated goals of Jones Lang LaSalle in this merger are securing a leadership position in public sector services, and strengthening its industrial brokerage, which Gates notes has become a global business more rapidly than the office and retail sectors. The firm also has expanded resources for practice groups within the brokerage business, such as law firms, healthcare, banking, and data and call centers.
The merged company is a product of a real estate industry that is consolidating and changing according to the needs of clients, who are demanding more services and delivery across a greater geography.
“There are a lot more responsibilities on corporations these days,” O’Brien says, “and they need go-to people who can handle their needs. Not just corporations, it’s all the larger entities and even the smaller and mid-size entities. They not only need your help in New York or in Washington or in L.A., they need your global help and they need help in other service lines.”
According to Gates, the firm is already delivering. Noting the “tremendous feedback” that is coming from clients and from within the organization, he says the firm is more than raring to go. O’Brien says he gets e-mails “almost every hour” informing him of how employees from the two camps are teaming up across business lines for a client.
“People have just been very responsive and very open to hearing other ideas, and we’re already reshaping some ideas as to how we’ll provide services and do things, from things we’re hearing from clients and also from how our different leaders are interacting,” O’Brien says.
“I think both our firms have taken a big leap in this commitment and this merger together, and I think over the coming weeks and months and years you’ll see great things out of Jones Lang LaSalle, not just our brokerage business, but our whole business.”