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M&A Audit

Great Prairie Group’s M&A Audit is a quick check on your plans and rationale for an M&A transaction. The audit asks critical questions to evaluate areas of strength and weakness to help your team improve the success of your project. These questions include the following:

  • Has the company articulated a clear strategy, including timelines and target objectives?
  • Is the strategic rationale of the merger supported by a quantified business case?
  • Can the company prove how the merger will build competitive advantage?
  • Can value creation be clearly determined?
  • Can managers key to the transaction explain how they will be able to create value for which they are responsible?
  • Does the company’s track record of past mergers indicate overpayment or failure to create value?
  • In case of failure, will the merger collapse the business?
  • Does the strategic due diligence of the target company incorporates large uncertainties?
  • Are the sources of information reliable? Is pertinent information available?
  • Does management have the metrics it needs to conduct an accurate valuation?
  • Is the justification of the deal based on best-case scenario assumptions?
  • Is the contingency planning against adverse outcomes credible?
  • Does the company respond quickly or appropriately to changing market conditions on the ground while planning the merger?
  • Is the price justified by rigorous testing of returns?
  • Has the central role of the acquisition team become one of winning the deal at any cost rather than buying at the right price?
  • Is the final price way above the original valuation? By how much?

Any of these symptoms calls for a check on the M&A plan. Given the large amount of resources at play, management may want to examine the process and “look under the hood” sort of speak. This check might avert unfavorable surprises down the road.

Merger and Acquisition Strategy

Buy/sell the right target company at the right price.

M&A deals are exciting opportunities for business expansion aimed at improving the financial performance of the firm. Important drivers of M&As include scale economies, increased revenue or market share, cross selling, synergies, diversification, resource transfer, vertical integration, and more. They are also used to rebalance the corporate business portfolio to extract significant value.

 

The Challenge. It is a known fact, however, that half of M&As fail to deliver on their promise. As common as M&A activities are, they are significant as they use vast amounts of company resources and take up considerable management time. Failed M&A deals not only compromise the strategy of the firm, but they incur considerable financial losses.

Despite their performance, acquisitions remain part of corporate strategy. That is because growth through acquisition has been vital to the success of many companies operating in today’s economy. Most CEOs realize that their companies cannot succeed without making acquisitions. Not every company can win market share away, particularly in mature industries, so acquisitions fill in the gap. Acquiring is much faster than organic growth, and speed is unquestionably essential in today’s economy.

How We Help

M&A strategy goes a long way to improve the odds of success of the deal. M&A strategy concerns aligning the firm’s strategic goals with the process of generating M&A transactions. The core logic is that transactions should be conducted only if they improve the strategic position of the investing firm. M&A strategy probes the strategic rationale and the validity of the transaction. What we do for our client

  • M&A Strategy
    • Determination of business growth through acquisitions that build competitive advantage. The strategic rationale may include improving the target company’s performance, consolidating markets to retire excess industry capacity, providing market access for small companies, gaining skills, or taking advantage of growth opportunities.
  • Target Screening
    • Examination of M&A target companies for attractiveness and viability. Targets are screened for strategic fit and potential value creation. The resulting candidate companies are then tested for interest in a M&A transaction.
  • Strategic Due Diligence
    • Informing our clients’ investment decisions through objective fact-based analysis of the target company’s strategic position.
  • Synergy Sizing
    • Analysis and quantification of synergy realization in joining two firms, including cross-selling, pricing, access to new markets, cost reduction, asset rationalization, risk reduction, and more.
  • Exit Strategy Formulation
    • A planned approach to maximize the benefit of exit, including examination of strategic company position (industry, market, cost, competitor), identification of strategic buyers, analysis of strategic fit and rationale for acquisition, quantification of potential synergies, and preliminary valuation.
  • Valuation
    • Business valuation based on the drivers of shareholder value (growth, profitability, asset leverage, cost of capital, and the quantification of company-specific risk premium).
  • Synergy Capture
    • Achievement of the full projected value of the synergy.

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