Case Question

I would need to clarify what is meant by value of the acquisition. I am assuming it is how much that company will be worth after the acquisition (not how much value the acquisition will create to Citibank)

1. How much are those card holders worth now? (revenues, costs, churn rate, client acquisition costs) → look at what I am doing here, I am asking for acquisition costs because I want to know how much does it cost me to keep that 100,000 stable, as otherwise I will have to do calculations with an ever decreasing client base… which is much harder (or use customer lifetime value, calculated using the churn rate, but I am not sure how common it would be to use multiples on that value). 

2. What is the impact of the acquisition:

• Potential Synergies (revenue - upsell / x-sell other products; reduced churn; client acquisition costs; reduced costs on administration and on financing costs)
• Potential Dissinergies (e.g. cannibalization/customers canceling the card after the acquisition)

3. Integration costs (I am separating these from (2) as those have a long term impact, and these are one-offs)

4. Valuation: (1) + (2) and then apply industry multiples (or citibank's current P/E ratio) as those are much easier in a case than NPV.

Hi there,

It entirely depends on how the case evolves! They may want a breakeven, ROI, or NPV. The most likely would be an NPV

I would need to understand the following:

1. Cost of aquisition (incl. merging costs)
2. Any ongoing costs
3. Added revenue
   1. $ profit per card holder (either lifetime or annual)

Hi!

Do you only have the case prompt?

If you know how the case evolves we can help you solve it.

Best,

Anto