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CHICAGO-Jones Lang LaSalle expects that a merger with Staubach Co. will diversify the firm’s revenue, and will make the public firm a strong player in tenant representation. “We will further diversify our business and help offset the current slowdown, which we are experiencing in capital markets,” said Colin Dyer, CEO of JLL, on Tuesday morning. Dyer and Lauralee Martin, CFO and COO, spoke to shareholders and answered questions on the merger, and a possible conflict of cultures, during a conference call this morning.

The company is acquiring Dallas-based Staubach in a $613 million deal, as previously reported by GlobeSt.com. More than 60% of the acquisition payments will be made in a deferred payment structure, Martin says. If certain growth objectives are not met, some of the deferred payments can be delayed up to 12 months, she says. The deal also calls for potential earn-out payments that are subject to performance metrics over a four-and-a-half year period after the closing. “The earn-out opportunity of $114 million commences as early as 2011 and it is based on performance incentives that are an alignment of our two merged tenant representational organizations to work successfully together,” Martin said during the call.

The merger “is the premier US brand in tenant representation,” Dyer says. Approximately 85% of Staubach’s revenue comes from tenant representation. Staubach is expected to have revenue of $375 million at the end of its current fiscal year, which ends June 30, Martin says. “The four-year compound annual growth rate is 15% for the last four years,” Dyer says. Staubach employs 1,000 professionals, of which about 700 are revenue producing.

The merger will diversify the firm’s revenue and is appealing because the tenant representation revenue is not dependent on capital markets, Martin says. “One of the aspects that the tenant representation offers is that you have a very large amount of just annuity characteristics to it because leases just have a contractual life,” she says. “At the end of that, a tenant needs to move or stay or do something, all of which generates a fee opportunity.” The merger will help the firm “against the capital markets weakness,” Martin adds.

Roger Staubach, who founded Staubach 31 years ago, will become the executive chairman for the Americas and will be on the firm’s board of directors, Dyer says. Greg, O’Brien, who has been Staubach’s CEO, will become the CEO of brokerage for the Americas and John Gates, who is currently Staubach’s president and COO, will be the president of brokerage for the Americas. Both O’Brien and Gates will also be on the firm’s Americas executive committee, Dyer says.

The merger will add 14 new corporate offices, bringing the total number of offices worldwide to 184, Dyer says. “The majority of the projected integration expenses, of approximately $25 million, will be occurred in 2008,” Martin says. Staubach has more than 300 stakeholders, “the majority of which are operators in the company,” she says.

There has been talk that the cultures of the two firms are quite different, but Dyer says there are some important similarities. “Both businesses are strongly committed to client service,…commitment to dealing with honesty and integrity…,and we are committed to collaborating internally,” Dyer says. There is “a huge basis of mutual respect as well,” he adds. “If there is a difference, it is around the level of the way in which the two businesses compensated their revenue producers,” he says. “We, at Jones Lang LaSalle, have been moving over time towards a more strongly variable compensation structure. The variable part linked more and more directly to actual production. So, we have been moving towards each other in that sense.”

Staubach had only represented tenants while JLL has represented both tenants and investors, Dyer says. However, JLL has processes in place, as will the combined firm and Staubach believes that there will be “advantages” as long as there are “the appropriate safeguards,” Dyer says.

The merger is one of many acquisitions JLL has done recently but officials are not precluding any future mergers. “We have had a pretty robust beginning of the year with multiple acquisitions around the world,” Martin says. “We would not see ourselves doing anything of size. This structure does not prohibit ourselves from looking at some smaller opportunities as we continue to look around the globe in a consolidating industry.”

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