M&A Framework

Question 1

Market Attractiveness (M&A Framework)

Answer 1

1. What is the market size?
2. What is the market growth rate?
3. What are the average profit margins?

*Profit margins (portion of sales revenue kept as profit after subtracting costs = profit/revenue x 100%

Question 1

Merger & Acquisition (M&A) Framework - 2 Common Business Situations

Answer 1

1. Company looking to acquire another company to:
   - access a new market
   - access new customers
   - grow revenues and profits
2. Private equity company looking to acquire the company as an investment:
   - GOAL: grow a business using operational expertise to sell the company years later for a high return on investment (ROI = Profit / Costs)

Question 2

Company Attractiveness (M&A Framework)

Answer 2

1. How much market share does the company have?
2. Is the company profitable?
3. Does the company have any competitive advantages?

Question 3

Synergies (M&A Framework) - Revenue

Answer 3

1. Are there potential revenue synergies?
   - access to new customer segments
   - access to new markets
   - access to new distribution channels
   - cross-selling opportunities (selling related products)
   - up-selling opportunities (selling higher end version of product)

Question 4

Synergies (M&A Framework) - Costs

Answer 4

1. Are there potential cost synergies?
   - eliminating cost redundancies
   - consolidating functions or groups
   - increasing buyer power with suppliers, manufacturers, distributors, or retailers

Question 5

Financial Considerations (M&A Framework)

Answer 5

1. Is the acquisition price reasonable?
2. What is the expected return on the acquisition?
3. What is the expected increase in annual revenue?
4. What are the expected cost savings?
5. What is the projected return on investment