THE VALUATION OF REAL ESTATE AS PART OF A MERGER AND ACQUISITION (M&A) DEAL.

When real estate is a component of an M&A deal, the following, similar, lasting questions will arise:

• Is the real estate an operating asset, a part of the business, critically necessary to continue the operations, un-separable for any other possible use or rezoning, or possibly used at its highest and best use?
• If the real estate is separable from the business, could the property be leased or sold to a third party for investment, and is it possible to put the property to a higher and best use?
• If the real estate is a non-operating asset of the business, is it nonessential to the on-going operations of the business, and could the property generate income?

The valuation of real estate; calculated separately from the ongoing operations of the business (separately priced or leased), or as a part of the operating assets of the business (balance sheet item), may create significant differences in values depending on how the above questions are answered. There is not necessarily a preferred method here, and often times, the value will be dependent on the desires of the buyer and seller.