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National online editor John Salustri provided additional reporting on this story.

DALLAS-In an industry that closely guards its deals, the hallmark merger between Trammell Crow Co. and CB Richard Ellis Group Inc. has taken insiders and outsiders alike by surprise. This despite rumors that have circulated for years about talks between the two giants. While insiders sort the fallout from the $2.2-billion, all-cash deal, market watchers on the outside are speculating about the aftershocks.

“We were a little surprised because rumors were rampant it was going to be C&W and Trammell,” Peter Hennessy, president of the New York office for the Staubach Co., tells GlobeSt.com. He says it’s hard to discern fact from fiction, but street talk has it that Cushman & Wakefield Inc. turned down an offer for the Dallas-based legacy company.

Hennessy says the eligible field is rapidly disappearing, but “C&W needs a merger partner. They’ve got to do something. Status quo won’t work for them. An 800-pound gorilla just became a 1,000-pound gorilla and C&W is still a 400-pound gorilla.”

Not so fast, says C&W president and CEO Bruce Mosler. “We’re a $1.5-billion business; the merger doesn’t change our plan at all,” he says. “C&W is going to grow its business in the fashion that we have determined is best suited to our business strategy. We’re still recognized as the leading brand in global real estate services and we will continue to keep our own counsel and pursue acquisitions and organized growth.”

Mosler cited acquisition conversations the firm is having in Asia as well as its current push to own all of its Latin American business and acquisition opportunities both in the states and “key European CBDs.”

On the West Coast, Bill Lee, managing principal of Lee & Associates, says the CBRE-TCC merger agreement surprised his team as well. From his perspective, it creates a dilemma for the combined company’s sales people on the street and a dichotomy for CBRE, which has long barred its pros from ownership circles to avoid business conflicts with clients. “Now, they’re buying one of the largest developers and property owners in the US,” he says. “I’m not so sure it’s going to help their sales people on the street. There’s no way they’d acquire Trammell Crow unless they wanted to capture development and ownership opportunities.”

Whether it’s the East Coast or West Coast perspective, the combined company will create the largest commercial real estate network in the world–a force of 21,000 professionals. Both acquirer and the acquired acknowledge there will be an attrition loss. Historically M&As result in 10% to 15% cuts in the ranks. In the case of the CBRE-Insignia ESG merger, the acquirer had 10,000 employees before the deal and 14,500 after the dust settled.

Among the issues to be addressed are TCC’s 30% stake in India’s Chesterton Meghraj, which hasn’t been ticketed for sale like the Savills plc interest, and 40% ownership in Krombach Partners in St. Louis. In fact, Lee says he wouldn’t be surprised if CBRE made a move for that 60% balance.

CBRE and TCC, stressing similar cultures, do have dissimilar pay structures. In an SEC filing Monday, TCC says each company will maintain its pay plan for 2007 and then “we will come together under a single commission schedule in 2008.”

Lee believes the pay structure could end up salaried. “For seven or eight years, CBRE has been moving toward a salaried real estate practice,” he adds. “Now, we’re seeing a revenue shift. It will be interesting to see how this plays out in five to 10 years.”

Just like the CBRE-TCC chief executives, Lee also is eyeing opportunity from the merger in the 33 markets where his firm goes head-to-head with CBRE for business. “I see an opportunity to pick up some talented folks,” he says.

Inside the TCC ranks, professionals were told that more information would be rolling out in the coming weeks. The aftershock is highly likely to produce spin-off companies from TCC’s respected ranks and some transitions before the merger’s final bell sounds. “That’s a natural result of these occurrences,” one insider says.

In the SEC filing, TCC says there will be severance packages and outplacement assistance for employees whose jobs are being cut. “We are extremely conscious of preserving the platform but inevitably, the blending of the two organizations will create some overlap,” TCC says in the SEC filing. “No final determination has been made as to specific workforce reductions.” The filing continues that the cuts won’t take effect until after the merger and as “much notice as practical” will be given.

There are roughly 20 cities where operations overlap in addition to corporate-level redundancies. In terms of the space, the lease and office size will weigh heavily on which address houses the team or whether a new location would best serve the plan, according to CBRE’s Calvin W. Frese Jr., president of the Americas.

Like the industry at large, TCC’s rank-and-file was caught off guard by Tuesday’s announcement. “It obviously was a well-kept secret,” the source says about the early morning e-mail ricocheting throughout the TCC hierarchy. “I think it caught everyone by surprise.”

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