M&A Analysis – Selecting Potential Targets (Examples from Management Consulting Projects)
Originally published: 28/09/2021 08:19
Publication number: ELQ-21873-1
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M&A Analysis – Selecting Potential Targets (Examples from Management Consulting Projects)

M&A Analysis – Selecting Potential Targets (Examples from Management Consulting Projects).

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M&A Analysis – Selecting Potential Targets (Examples from Management Consulting Projects).
Consulting firms are hired very often to help with Mergers & Acquisitions. Those projects are difficult as you have to deliver results fast and you have to deal with many stakeholders. You not only have to help select potential targets, model businesses in Excel, but also you will have to estimate the potential benefits of M&A, the value of the firm, and forecast the development of the acquired firms.
I will show you using 2 examples of how you can select potential targets for Mergers & acquisitions.
In the first example, we create a strategy of acquisition for a Beer Producer that is analyzing 5 countries. In every country, he is analyzing 2 potential targets and greenfield investment.
In the sheet “Targets” we have data on every potential option. We have the market shares in local markets, sales in quantity, revenues, EBITDA level, % EBITDA. For the potential acquisitions, we estimate the potential acquisition prices and costs. For the greenfield option, we estimate the cost of building the plants and acquiring customers. Based on calculations we look at the Efficiency (measured in cost per 100 M liters), increase in Enterprise Value (caused by acquisition or creation of specific firm), increase at market cap. In the end, we find the best options using 2 criteria: Market Cap Increase (sheet” Market Cat O”) and efficiency of getting 100 M of sales (sheet “Efficiency O”).
In the second example, we rank different potential targets for a milk producer. We will look at 4 criteria: Revenues, % EBITDA, Automation Level, Region (location). Based on rules for giving points (defined in a separate sheet for every criterion), and defined weights we calculate the weighted average score.
After that, we conduct threshold analysis based on a defined threshold (minimal weighted average score and minimal additional EBITDA).
All assumptions are in blue cells so you can adjust the files to your needs by playing the cells in blue,


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