Part 1: Financials
Revenue: If the target acquisition candidate has a
revenue stream, divide the expected purchase price by the average yearly
revenue stream over the past two years.
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[ ] The result is less than or equal to 2. (4) -
[ ] The result is more than 2 but less than or equal to 3. (4) -
[ ] The result is more than 3 but less than or equal to 4. (3) -
[ ] The result is more than 4 but less than or equal to 5. (0) -
[ ] The result is more than 5 or the company has no revenue
stream. (-1)
expected purchase price by last fiscal year’s earnings before taxes,
depreciation, and amortization. (If not profitable, score 0.)
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[ ] The result is less than or equal to 5. (6) -
[ ] The result is more than 5 but less than or equal to 7. (4) -
[ ] The result is more than 7 but less than or equal to 9. (2) -
[ ] The result is more than 9 but less than or equal to 11. (0) -
[ ] The result is more than 11 or the company is not
profitable. (-1)
the dollar value of the target’s outstanding stock by its last year’s
net profit. Do the same for your firm.
-
[ ] The target’s valuation is more than twice your
firm’s valuation. (5) -
[ ] The target’s valuation is more than your firm’s
valuation. (3) -
[ ] The target’s valuation is identical to your firm’s
valuation or the target is not publicly held. (0) -
[ ] The target’s valuation is less than your firm’s
valuation. (-3) -
[ ] The target’s valuation is less than half your
firm’s valuation. (-7)
(SS1)
Part 2: Product
Uniqueness: The target’s offerings are:
-
[ ] Absolutely unique in this industry (5) -
[ ] Better than other offerings (3) -
[ ] About average for the industry (1) -
[ ] In need of some work to come up to par (-1) -
[ ] Obsolete and out of date (-6)
offerings have:
-
[ ] A fanatically loyal user base (4) -
[ ] An enthusiastic user base (3) -
[ ] A set of early adopters (2) -
[ ] Some interested potential customers (1) -
[ ] Existing customers who are actively hostile (-5)
offerings command:
-
[ ] A major share in a rapidly growing market (7) -
[ ] A minor share in a rapidly growing market (3) -
[ ] A major share of a mature market (3) -
[ ] A minor share in a mature market (2) -
[ ] The product has yet to establish a market (-2)
(SS2)
Part 3: Personnel
Competence: In general, the target’s
management:
-
[ ] Possesses unique knowledge and experience (5) -
[ ] Would be a big asset inside any organization (3) -
[ ] Are about average for the breed in this industry (2) -
[ ] Would be accepted, but without enthusiasm (1) -
[ ] Could do cameos in a “Dilbert” comic
strip (-3)
employees:
-
[ ] Possess technical skills that are impossible to find
elsewhere (7) -
[ ] Would be extremely expensive to recruit separately (5) -
[ ] Have compatible skills with your employees (3) -
[ ] Are barely adequate to the tasks at hand (1) -
[ ] Are candidates for layoffs soon after the merger (-4)
corporate culture is like:
-
[ ] Manhattan compared to Queens (5) -
[ ] New York City compared to Boston (3) -
[ ] New York State compared to Arkansas (-1) -
[ ] The United States compared to Kazakhstan (-5) -
[ ] Planet Earth compared to “Bizzaro” world
(-10)
(SS3)
Part 4: Your M&A Strategy
Rank the following strategic reasons for your M&A
from 5 (highest) to 1 (lowest) according to their importance to your firm:
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Final Scoring
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Analysis
- Final score is over 300. This is a highly
attractive deal. You have obviously done your homework and found a
candidate that matches your strategy. - Final score is between 200 and 300. This is an
excellent deal. While there may be some challenges, there’s a
good chance that the acquired firm will integrate well and help you
achieve your corporate strategy. - Final score is between 100 and 200. This is a
marginal deal. There are some things about the acquisition that might be
advantageous, but there are problems waiting in the wings. Proceed with
great caution. - Final score is less than 100. Forget it. Run, don’t
walk, to the nearest exit.