How to evaluate cost/benefits of acquisition targets in a real growth strategy project?

Question

Dear all, I'd like to hear your experience of evaluating the attractiveness of acquisition targets in a growth strategy project context. How would you analyze the cost/benefit of the target? Except strategic rationales, what other parts would be typically covered? Is IRR/break even analysis typically included?

Just wondering for typical inorganic growth projects, how financial / quantitative and how deep are the evaluation of acquisition targets? Does the simplified analysis conducted in case preps mirror what consultants do in real project? I'm curious whether specific “quantitative analysis (ex: IRR / financial projection / break even period estimation)” are usually conducted, or in practice it is more about “high level analysis (such as top line forecast)”? Taking IRR for example, in real life it would require many resources / details to conduct such an analysis. Thanks for sharing!

Answer 1

Hi there,

To be honest, this probably isn't the best form for this question. We're publically advising you how to do your job which is a bit risky.

My strong advice is to speak with other people in your company. Tap into your network and speak to others that have done DDS.

Furthermore, leverage your company's internal resources (past project reports, etc.) to get inspiration.

What I will say is most DDs I see tend to look at TAM, then % of TAM the company is likely to get/hold, then expected margins on that market share. This is at a high level of course, but it's hard to explain more here!

Best of luck!