GlobeSt.com SPECIAL REPORT: M&A Rumors Pose Questions of Synergy

"These mergers are reflective of the maturation of the commercial real estate industry into an accepted asset class," says Kenneth P. Riggs Jr., CEO of Chicago-based Real Estate Research Corp. "It's not necessarily a quick and easy deal, but "it can be more successful today than it has in the past," he adds.

Riggs says the biggest challenge when companies align is wedding national platforms and still maintaining a grip on local business. The entrepreneurial spirits that built the empires could also take them down if synergies collide, a dichotomy that's more prevalent in commercial real estate than other industries because the value lies in its people and the delivery of service rather than an assembly line, he explains.

In North Texas, the memory of CB Richard Ellis Inc. taking over of Insignia/ESG is still fresh, a deal that put Phil Baker in a specially created executive vice president's seat for five months. The $415-million M&A came 18 months after Baker merged his 24-broker Baker Commercial Realty into I/ESG and assumed the helm. "I wanted to honor my contract," Baker says of the decision to take the reins for CBRE to recreate his success in Las Colinas.

Baker says he wasn't an isolated case in the aftermath of the M&A. "Quite a few left nationally," he tells GlobeSt.com. "I negotiated out of my contract and it allowed me to open my own shop." Fourteen months later, Baker has his new operation, Magellan Commercial Realty, at eight brokers in a slow, but paced growth to rebuild his team.

It often becomes a test of survival when a different corporate culture attempts to harness the entrepreneurial spirit of professionals like Baker, who have built their own shops from scratch. "There is a necessity that you merge cultures. Obviously the acquirer's culture is going to come out on top," Baker says. "When you go from a shop of 24 to a shop of 100 brokers, it requires some getting used to. Guys with entrepreneurial spirits can have a difficult time adjusting to a plan that wasn't their own. That's not to say it was right or wrong. For me, it made more sense to do my own thing again."

A CBRE spokesman says Baker's situation was, in fact, unusual. Despite a lawsuit with a sealed outcome, both sides say there is no animosity over the split.

Amid the struggle for a successful marriage comes the dilemma of dealing with more forms, different procedures and lawyer-scripted rules versus a "gentlemen's handshake" on a street-savvy deal. And that, Riggs says, is another chief hurdle to overcome: merging spirits, business practices, compensation and "the institutional mentality" in an arena where delivery of service, local ties and the people behind the flag are the true assets more so than the accounts that go along with the trade when an M&A is inked. This week's Issues in Focus takes an in-depth look at mergers and acquisitions, the hot shop talk and analysts' perceptions about the latest rumors.