Adapting to different skill sets.
Just as important is what happens in the trenches. If the generals doing the acquiring operate in very different ways; The soldiers have markedly different skill sets, and cultures as well. The newly merged entities will find themselves with a greater variety of teams and skillsets they need to integrate. This will throw up two very specific challenges:
Firstly, the high growth areas within real estate, eg logistics, healthcare, living – are now targeted as specialist areas within real estate as opposed to being driven by more of a bottom-up approach. There is a higher percentage of people with operational backgrounds and a penchant for the technical as well as a ‘nose’ for deals. Finding and absorbing these skills and personalities will be somewhat akin to the fundamental adjustment going on now as platforms with core investment banking and M&A acumen add key specialization as well as skills like intimate tenant demand understanding as well as data aggregation and analysis elements to drive the search for value.
The other key challenge will be the need to manage new infrastructure and complexity.
For example, if PE funds go down the risk curve and start buying core businesses, they will now acquire research and strategy functions that traditionally have been integral parts of the core businesses. But, were not necessarily part of the high-octane PE approach where speed is of the essence. Hence yet more adaptation, and integration.
The difficulty in integrating new teams, skills, and cultures is rightly recognized as the number one reason most acquisitions fail. How firms handle this will be a key indicator of success in 2020. Recruitment strategies.