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Make M&A Cases structured

Carl asked on Aug 26, 2019 - 2 answers


I am struggling a bit with M&A cases and how to make your framework for them structured. So let's say you get an M&A case where the target is to get an ROI of X%, there are two overarching things I want to answer:

  1. If we purchase, will we get ROI of X%?
  2. Can we purchase, without any major risks.

Looking into 1, this comes down to the profits from this investment and the purchasing price. Looking at the profits from investment we both have the standalone profits from the target company and its projections, as well as the effect from purchase (synergies, cannibalization, integration costs.). Here is my problem, to evaluate whether or not the profits projections are reasonable, I would want to understand the market and where the target company stands in the market (its positioning, brand, etc.). But how would you make this into a structured issue tree and what would you call your branches?

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replied on Aug 26, 2019
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School
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Let's structure a bit the M&A cases. By the type of the client it can be:

  1. Private Equity fund doing an acquisition
  2. The company acquiring another company

At the consulting interviews you may have the following types of M&A cases:

  1. Due-diligence of the target company
  2. Synergies calculation of two merging companies (or synergies with the other company in PE fund portfolio)
  3. 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):


  • Size & Growth rates
  • Profitability
  • Segments & growth rates
  • Regulation


  • 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:

  1. 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.)
  2. Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
  3. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  4. Total synergies potential in $, adjusted by risk (probability of failure)

Good luck!

replied on Aug 27, 2019
Former Director in Big Four Firms, Operations, M&A and Cash Management Expert
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Hi Carl,

Maybe you want to use something like Porter's five forces model (competition, barriers to entry/exit, substitutes, suppliers/customers power) to evaluate the market and the positioning of the target company.

I hope this helps.

Best, Fernando

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