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I need to prepare cases on Operational Due diligence for M&A/Carve out cases.Can anyone help me with the practice
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Hi!
I have a lot of experience with the topic (led a practice on this) and would be happy to help.
Best, Fernando
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Hi,
Feel free to reach out - I can help you with prep. Here are some tips:
Let's structure a bit the M&A cases. By the type of the client it can be:
- Private Equity fund doing an acquisition
- The company acquiring another company
At the consulting interviews you may have the following types of M&A cases:
- Due-diligence of the target company
- Synergies calculation of two merging companies (or synergies with the other company in PE fund portfolio)
- A mix of both (Pls check with clarifying questions)
1. For Due Diligence I would use the following structure (It's exactly the structure used on the real consulting projects):
Market
- Size & Growth rates
- Profitability
- Segments & growth rates
- Regulation
Competition
- Market shares of competitors and their segments (see the next point)
- Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
- Unit economics of the players (Margins, relative cost position)
- Key capabilities of the players (e.g. suppliers, assets, IP, etc)
Target Company
- Revenue and growth rates
- Profits
- Unit economics (Product mix, Price per unit, cost per unit)
- Key capabilities
Feasibility of exit (for PE fund):
- Are we reaching the target returns?
- Exit time
- Existence of buyers
- Risks
2. For Synergies Calculation you can use the following structure:
- Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
- Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
- Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
- Total synergies potential in $, adjusted by risk (probability of failure)
Good luck!
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