Mergers And Acquisitions

In this post, i provide insights into the importance of Real Options in valuations and how adding optionality to your DCF will help you value companies better.

When any cross-border M&A happens, the sentiment is that cultural considerations are essential in making these deals (i.e., mergers, acquisitions, or divestments) succeed. In this piece, i present my perspective on why culture continues to be critical to the success of cross-border M&A deals.

Last week, Panasonic Corporation acquired 80% of digital fulfillment and supply chain management specialist Blue Yonder, formerly JDA Software, for $7.1 billion at an $8.5 billion valuation. This deal is the subsequent significant acquisition from a Japanese company after Hitachi acquired Global Logic last month. In this article, i give my insights on how Panasonic’s acquisition of Blue Yonders impacts the digital outsourcing market.

In my view, Global Logic plugs the gap for Hitachi in Software development capabilities as Global Logic is strong at building software products. With this acquisition, Hitachi follows GE, Siemens’s footsteps in becoming a premier digital industrial company and software company. It’s a far cry from Hitachi; we know that manufactures home air conditioners and VCRs by Hitachi. We are driving towards a software-driven world.

Spin-offs as a restructuring strategy get used to redeploy assets by returning cash or noncash assets through a special dividend to shareholders or using cash proceeds to pay off debt. On average, Spin-offs create positive abnormal financial returns for shareholders around the announcement date because they tend to correct the parent’s problems. However, the longer-term performance of spin-offs is questionable.

At the right price, LBO’s are not human-made disasters as commonly perceived by experts. In my view, LBO’s have added the target firm’s value concerning strategy development, operational, financial, and human resource management, marketing, and sales because of the Private Equity firm’s more focused, less bureaucratic approach. 

An acquisition provides you the potential for generating value in the organization, but the business benefits are achieved only in the actual integration. Thus, your most suitable case for enhanced integration support may need painting a more dismal picture of the future should sound integration management be wanting.

An acquisition is just one of several options available for implementing a business strategy. The decision to pursue an acquisition usually rests on the desire to achieve control so that the acquisition will deliver the sought objectives more quickly than other alternatives. Once a firm has concluded that an acquisition is crucial to realizing its strategic direction, developing a merger/acquisition plan is essential. 

Overall, though, favorable interest rates and the prolonged availability of capital are estimated to boost M&A action in 2021 – even if dealmakers travel less and remain to operate remotely. 

The valuation for Doordash at 15 times sales multiple for a business with potential low margins, with no moat other than scale, is outlandish. At least Airbnb has some genuine competitive advantages in its industry compared to DoorDash. In this article, i provide my analysis of DoorDash IPO, why DoorDash is priced heavily by the investors, and if this speculative pricing is a warning to the impending global crash.

In my view, Airbnb looks significantly overvalued, and this crazy IPO buzz of recent weeks is getting me nervous. It’s not only Airbnb. Tesla’s value (at ~$600 billion) has skyrocketed this year even though it plans on manufacturing less than half a million cars next year.DoorDash IPO’d the day before Airbnb also had insane pricing. 

At $27.7 Billion, the Salesforce- Slack deal is 2020’s largest tech acquisition, beating last year’s mega acquisition deal of Tableau ($15.7 billion). The $27.7 billion deal is an investment that would yield a greater return to meet the growing demand for 100% secured Cloud-based apps for the digital economy. However, one thing is definite: connecting Slack’s collaboration functionality with Salesforce’s sales productivity tooling signifies a monumental step forward in enterprise software history.

While analyzing a company’s performance for valuations, it is more beneficial to disaggregate value drivers—both ROIC and revenue growth—as far as possible. If feasible, link operational performance measures with every key value driver.

Analyzing a company’s current and past performance in business valuations is essential to projecting its future. So a meticulous analysis of historical performance is a crucial valuation component. Before we start with the analysis, we should re-organize the financial statements. 

Re-organization of financial statements for business valuation is crucial but a tedious process. From a valuation perspective, consistency is essential when classifying each line item else it will impact our judgments about return on invested capital and, eventually, value creation. 

To develop the financial statements for interpreting financial performance, you should reorganize every financial statement into three categories: operating items, non-operating items, and sources of financing. It usually entails hunting through the notes to separate accounts that aggregate operating and non-operating items.

In this post, i present a step by step approach on valuing a company by Adjusted Present Value (APV) method. When appropriately applied, the APV model results in an identical value as the enterprise DCF value.

When i perform valuations, i concentrate on two approaches: enterprise discounted cash flow (DCF) and discounted Economic Profit. DCF relies on cash flow in and out of the company, rather than on accounting-based earnings. The discounted economic-profit valuation model can be very relevant due to its close link to business theory and competitive strategy. Economic Profit highlights whether a business is earning more than its WACC and quantifies the value generated each year. This post will provide my insights on the most common valuation frameworks applied to value an enterprise.

In valuation, the topics of risk and capital cost are crucial, integral, and laden with misunderstandings.These misunderstandings can lead to strategic blunders. For instance, when a firm borrows capital to fund an acquisition and employs only the cost of debt to the target’s cash flows, it might inevitably overvalue by two times the target’s value. Conversely, when a company attaches an arbitrary risk premium to a target’s cost of capital in an emerging market, it could undervalue the company by half. In this post, I provide insights on understanding the risks and cost of capital in business valuation

Digital M&A is an engine of digital transformation, and ignoring it is an invite to slipping behind the competition. Mature acquirers develop digital M&A as a core competence.

Divestitures can be defying for the groups tasked with executing them. By defining the assets in question, marketing them efficiently, and predicting the complexity of disengaging them from the existing business, managers can maintain the focus on generating the most value for buyers and sellers alike.

M&A partners have to deal with an exceptional amount of obscurity as a consequence of the COVID-19 pandemic. Therefore, due diligence efforts and transaction structures shall shift from a highly pro-seller situation to one in which buyers and sellers want to be more flexible and original for earmarking the valuation and financing risks among them. If a seller can pause for more desirable conditions, then they will do so. But many sellers still want to strive to get a transaction closed. Furthermore, private equity buyers have multiple funds to invest and will want to deploy capital at some point, particularly those with funds that have investment periods coming to an end. Cash-rich strategic buyers, and particularly those seeing for businesses with new products and technology, may find this an attractive opportunity to acquire firms that are a strategic fit. This situation may offer strategic buyers who are previously familiar with the industry and the target business with numerous possibilities, mainly if they are ready to proceed swiftly and are keen to be more inventive with their deal structures.

During the COVID-19 pandemic, M&A activity has decreased significantly, and first-quarter earnings statements have revealed that even the United States’ biggest corporations like Amazon and Apple were not immune to the unfavorable consequences of COVID19. Amidst all of this change, though, several transactions have still been closed. Transactions that have closed have required adaptability from both buyers and sellers to reach at imaginative transaction structures to accelerate deals over the end line. This post will further investigate how these M&A deal structures in the COVID-19 era were employed to execute M&A transactions and private equity recapitalizations. 

Obscurity from COVID-19 and the human casualties it is taking make this crisis much more worrisome than several earlier global challenges. Organizations that can swiftly adapt their tactics to the financial and humane shocks of the pandemic become best placed to rise from the crisis sound and profitable. With a mindset to M&A, companies can enable and also expedite these strategic shifts.

In many deals, i have witnessed that there was too much leakage between the notion of acquiring a business, turning that acquisition into expectations, turning those expectations into budgets, and eventually turning those budgets into cash flows.  Hence the acquirers need to plan to succeed in achieving M&A synergies so that they can deliver higher shareholder returns.

Given developments in consumer spending across channels as well as steadfast concerns about wellness and safety, and notwithstanding the more uncertain economic forecast, I anticipate retail M&A activity to expedite as the crisis stabilizes.

Allocating time upfront, building an M&A plan will pay off over the long term—especially given the volume of deals connected with an M&A strategy. With M&A ideas and guidelines well defined and agreed by all, businesses can not only be more proactive but also more opportunistic.

To gain clarity in the middle of COVID-19 Catastrophe, executives should challenge themselves with crucial questions to stimulate more vigorous M&A.

What might be the state of things to come in the M&A markets?

I think there are genuine reasons to be confident that the transactions market will recover, and quite vigorously. The world has evolved, but change can often be a significant spur to reform. However, before the crisis gets in check and confidence gets revived, prophesying the timing, the scale, and the state of that revival remains a topic of speculation.

Corporate decision-makers have no readymade playbook to sail this novel global health and financial disaster. A specific amount of improvising will be needed to sustain the crisis and accelerate out of the ultimate recovery. For businesses with sound balance sheets, M&A will represent a vital role. Preparation, calm nerves and a zeal to be brave are the clues to victory.

Divestitures are very familiar, and they create significant value. On average, nearly two-thirds of strategic deals committed divestitures over the past decade.

As buyers and sellers attempt to allocate the risks connected with the forces of the coronavirus on the target business and, more broadly, the global industry and markets, deal terms in acquisition contracts need to get studied.

A purpose without a strategy is merely a fantasy. Successful acquirers starting on capability deals proactively transform the deal thesis into an action plan. They leverage a capability deal’s enormous potential to transform their organization and leapfrog the rival(s).

Outlining an M&A roadmap for discovering and cultivating new growth engines begins by profoundly learning a different strategic course and differentiated abilities. The M&A roadmap should stem from corporate strategy. Successful acquirers follow private equity firms in their M&A screening strategies, with a formal investment board and continuous updates to the target list.

Spin-offs in corporate restructuring have become very relevant in today’s market. Corporate restructuring is an operation taken by a corporation to significantly transform the financial and operational perspectives of the organization, customarily when the business is encountering financial hardships. Let us discuss what spin-offs are and how it provides benefits to both the parent company and the spun business entity.

As the demand to maximize the value of M&A transactions strengthens, understanding what distinguishes a right cross-selling opportunity from wishful thinking effects a real competitive edge.

There is a high probability that Coronavirus pandemic will trigger a meltdown in global equity markets, with almost every industry, certain to witness an earnings decline. The companies that are directly affected by the virus are the hotels and the airline sector. These businesses are likely to witness a downside effect as the consequence of the Coronavirus.

Intuit acquisition of Credit Karma denoted to the growing skepticism that investors have been showing toward tech startups. Credit Karma presumed to proceed with an initial public offering. But numerous notable growing tech companies, such as ride-hailing companies Uber and Lyft, went public last year — and have seen their stock prices plummet after Wall Street challenged whether they could become profitable.

The failures to consummate deals, notwithstanding months of diligence and prep, following on both sides, and an even enthusiasm to generate value usually spring from unresolvable disputes around valuation or the failure of one or both parties to alleviate risk efficiently.
Earn-outs, though usually tricky to negotiate, are means to both break purchase-price standoffs and reallocate risk.

This week Infosys acquisition of Simplus, a Salesforce integration consultant, for $250 million created great excitement. After evaluating this transaction in detail, I find that there are the pros and cons of Infosys’ acquisition of Simplus.

Inadequate diligence is the root cause of M&A transaction’s failure Although failed integrations seize the headlines, inadequate diligence is the root cause of M&A transaction’s failure. Approximately 60% of deals associated with the M&A transaction failed due to ineffectual due diligence that did not recognize crucial problems. Failure of due diligence to highlight issues around

10 Biggest Trends in Mergers and Acquisitions In January 2020 We’re just touching one month into the New Year, and more than 25 technology merger and acquisition (M&A) deals got concluded in such a short time frame. Several of the buyouts include MSPs (managed IT services providers), IT consulting firms, ISVs, and private equity firms. These

If there is one cliché in the craft of mergers and acquisitions, it is this: the victory of the transaction depends on the realization of the integration process. Leaders of acquired businesses must operate as mediators between parents and a new subsidiary, which may include setting up a ringfence. It could also indicate a new order at the parent company and opinion at the boardroom table.

Scope M&A in 2020 – Dealmaking is quickening over businesses Scope M&A in 2020 presently estimates for approximately 60% of all strategic transactions valued over $1 billion. The surge in scope deals is due to a low-growth situation and business model disruption over various industries. While scope dealmaking is widespread across divisions, healthcare, technology, and

Financial due diligence (FDD) has become an essential component of the mergers and acquisitions aspect. At the same time, FDD is not an audit or pledge commitment and cannot assure complete safeguard toward downright deception and management misrepresentation.

Tech M&A has grown more critical sources of value in the technology sector over the prior decade. They will remain to execute an essential function in tech companies’ policies in the times ahead.

Essential success factors in value creation in mergers and acquisitions to be recognized when it comes to maximizing the likelihood of a thriving (accretive) transaction involve the following

Value creation in M&A Value creation in M&A is the goal, driver, and test of any M&A deal. M&A is not a cheap or straightforward way of realizing growth. It usually is the most dangerous and least probable to succeed. Still, if executed well, it prevails the most reliable way to expand immediately comparable to

Across the current decade, we’ve observed an unparalleled level of acquisitions by holding businesses to support their ever-increasing growth targets. Hence it is imperative to have a successful mergers and acquisitions strategy.

Cost and Revenue Synergies in Mergers and Acquisitions Synergy is a phrase that gets used in the connection between mergers and acquisitions (M&A). Synergies in mergers and acquisitions are the notion that the merged value and performance of two businesses will be higher than the sum of the separate, distinct parts. Cost and revenue synergies in mergers and acquisitions

The word synergies in mergers and acquisitions get frequently abused in the M&A vocabulary, notably by some investment banks, deal brokers, and consultants, all assuring them in excess and quickly delivered.

Value Creation in Mergers and Acquisitions Successful acquirers take a strategic, long-term program to value creation in mergers and acquisitions. They spend time and resources to develop an end-to-end M&A approach, including a broad understanding of how M&A assists their overall strategy. Further, they build the merger management expertise needed to execute, and the long-term

The riskiest phase of M&A Integration The figures don’t exaggerate. Several best corporate managers get confronted with the trial of a postmerger integration (PMI). And experiential researches show that one of every two PMI attempts perform poorly. These statistics are especially revealing given that mergers and acquisitions are a staple management tool for about a

LVMH Acquisition Of Tiffany & Co Overview Commonly expressing, organic growth is more economical than growth by other means like M&A (mergers and acquisitions). However, M&A has a position in the expansion of a firm, especially those that are sizable players in their businesses. Though high-priced, the benefit of M&A-oriented growth is twofold. For beginners,

To strengthen employee retention post-M&A, over the extended duration, businesses and managers need to take concrete actions to enhance employee engagement and retention by giving supplementary assistance.

M&A is at the heart of the digital transformation strategy Digital transformation remains to be a compelling storyline across the enterprises, and M&A is at the heart of the digital transformation strategy. Enterprises decision-makers are actively exploring technology-enabled solutions that accelerate access, efficiency, and enhanced user experience for stakeholders, and the business is sprinting to

The potential for value creation in buy and build strategy in mergers and acquisitions (M&A) demands refined due diligence, a precise playbook, and adept, skilled leadership.

The initial 12 months post-close in M&A integration are the most significant for achieving synergies. At the commencement of a regular M&A integration exercise, the integration team applies the deal model and due-diligence results to recognize opportunities and fix synergy targets.

PayPal acquisition of Honey Science Corporation – the creators of a deal-finding web browser add-on and mobile app, is its largest acquisition in history for $4 billion.

Choosing the best M&A integration practices is necessary The majority of M&A integration is not successful. The financial proposition is the deciding criterion for the majority of the M&A transactions. But once the deal closes, success relies on management performance. And it does not matter how well thought the deal is, it is not a

Large M&A Transactions Fail History shows that many large M&A transactions are significant failures. The recent downfall of Thomas Cook, marred by a massive debt pile measuring back to an unfortunate 2007 merger with MyTravel, is a warning of an undeniable fact: mergers and acquisitions (M&A) is a precarious business. The Thomas Cook disaster was

While there are multiple reasons deals do not close, the above cases are common causes M&A transactions fail to cross the final stretch successfully.

The changing nature of data storage will lead to cybersecurity M&A of some of the higher-performing startups and midsized cybersecurity companies. As per Capgemini, 69% of companies believe Artificial Intelligence (AI) will be essential to counter cyberattacks. Vendors making the best use of AI in their products will be the most sought-after future M&A targets.

WeWork, an American commercial real estate company founded in 2010, is reportedly planning on laying offs at least 4,000 jobs to achieve financial stability

Xerox threatens hostile takeover after HP rebuffs $30bn acquisition bid.
HP remains open to discussions but Xerox has set out plans to approach shareholders directly

McKinsey’s research has found that acquirers have a higher success rate when they close many small transactions regularly. This method creates more value than those closing occasional large deals. McKinsey describes this approach as programmatic M&A. 

Cross-border M&A is a crucial means for generating shareholder value and entering new markets. It enables companies to pursue new technologies, capabilities, and products while driving growth, innovation, and transformation.

Google acquires CloudSimple to bring more VMware workloads into its cloud.

Whether the post-merger or acquisition focus is on combining cultures, adopting the cultural traits of the acquiring company, or creating a culture where the two company cultures operate effectively as two disparate cultures, leaders must take accountability to create the culture that will be essential to success, in both the long and short-term.

With growing market uncertainty, digital presents organizations with possibilities to distinguish and drive performance.

M&A activity will experience a sharp dip in 2020 due to ongoing global economic uncertainty and the risk of the worldwide recession — the only exception to this trend in North America, where the deal activity will see an increase.

Saudi Aramco IPO overview The Saudi Aramco IPO may become the world’s biggest, surpassing Ali Baba’s in 2014 if the valuation reaches the upper end. Saudi Aramco, a Saudi Arabian national petroleum and natural gas company located in Dhahran, is targeting a valuation between $1.6 trillion and $1.7 trillion for its initial public offering and

M&A activity in digital marketing is rapidly transforming The trillion-dollar advertising space is witnessing rapid M&A activity, primarily on the digital marketing side. With the increase in digital advertising revenues, there is a global demand for more online content. Lead generation, advertising, search engine optimization, and affiliate partnerships are significant drivers of revenues in digital

M&A Integration as a Catalyst for Transformation A M&A integration is not only an opportunity to achieve synergies but a great time to bring the right changes. Successful acquirers get this right in almost all their deals. Delivering transformation changes is not easy. Organizations resist changes. Mergers can help achieve this. M&A integration create both

Cultural assessment in M&A Culture eats strategy for breakfast. The above quote is very popular in the M&A circles. Time and again it is proven that cultural assessment in M&A drive better integration results. In reality, most organizations fail to address culture. This leaves them vulnerable to deal value erosion. A cultural assessment can help

Culture is critical in M&A Integration M&A integration requires a lot of efforts, time and capital. Multiple teams are involved to execute a M&A transaction. Inspite of huge efforts, most of the deals fail to realize the anticipated outcomes. Areas where most of the acquirers tumble is with respect to Culture. Acquirers need to avoid

Google Fitbit acquisition Last week Google acquired Fitbit for $2.1 billion in cash. Google’s acquisition of Fitbit will give Google a foothold in the wearables market. Google has been struggling to gain market share in wearables market. Google built its Wear OS – A smartwatch operating system based on Android. Google licensed its wear OS

Why ‘technology fit’ is important? In a M&A deal, many of the risks are identified during the due diligence. These risks extend from cultural mismatch to financial risks. One critical area where due diligence is required is in assessing the technology fit of the two entities. M&A is done to pursue organizational growth, customer acquisition

Technology M&A activity in 2019 The global technology M&A activity has witnessed a decline in 2019 due to uncertainties in macroeconomic trends including an anticipated economic slowdown and geopolitical concerns including Brexit and US China Trade war. On the other hand, low interest rates and high cash reserves available with lot of major corporations can

Xerox offer to buy HP The markets were in for a shock today when Wall street journal reported that Xerox Holding is intending to acquire HP through cash and stock bid. This development took place after the activist investor Carl Icahn backs Xerox to acquire HP. Icahn holds stake in both the companies. This is

Importance of a M&A model M&A is derived from the corporate strategy where the acquirer look for synergies from the target company in order to improve their profitability and market share. It is necessary to build a M&A model that The synergies that acquirers look at can come under variety of reasons. Revenues Synergies –

Effects of Big Tech Acquisitions Leading tech giants including Google, Amazon and Facebook have used acquisitions as a strategy to eliminate competition and expand their market share.They have acquired companies that could have been potential competitors to them in the future. It is no wonder that many of these companies are subjects of regulatory scrutiny.There

Google’s acquisition of Fitbit Google’s acquisition of Fitbit – A fitness tracking pioneer for $2.1 billion is done to take on Apple’s fast growing wearables tech business. This acquisition can put Google under the ambit of antitrust authorities.Fitbit which went public four years back was valued at $4 billion and Google has bought Fitbit at

Most M&A Due Diligence fail to projected right synergies numbers Majority of the M&A due diligence deals fail to deliver their synergies targets.In most of the cases, they fail to project the right synergies numbers and overestimate the target numbers.This is because they approach due diligence as a series of unrelated questions targeting issues such

Recent flurry of Adtech M&A When we look at this month of October, there has been a recent flurry of Adtech M&A.This has left many observers and analysts wondering the reason behind this. When we dissect the Adtech M&A activity in 2019, the first half of 2019 was slower due to regulatory uncertainty and fears

M&A deal terms are changing M&A deal terms are changing in 2019. Uncertainty has been a significant factor in 2019.Along with fears of a global economic slowdown, we have also witnessed considerable geopolitical tensions like UK’s decision to leave the European Union, protectionist responses to China as a global investor, market volatility and US China

Digital M&A For the Digital M&A to be successful, acquirers needs to create a seamless digital experience for their customers, employees and partners post acquisition.Technology has enabled companies to scale their market share by leveraging platforms and ecosystems of integrated digital products and services.Digital has intensified competition among companies.Hence companies in order to improve their

Valuation of Fintech company Fintech has become popular because many of its products touch our lives every day. Hence valuation of a fintech company is critical. A Fintech operates in Financial services sector but leverages the power of technology to simplify, automate and improve the delivery of Financial services to end customers.Fintech operates in various

M&A value drivers The M&A activity continues to be strong especially in US.Many companies want to take advantage of the current situation to sell and exit their businesses. During the M&A, the buyers need to identify the right M&A value drivers of the target company and then compare it with the target company’s competitors to

M&A integration is crucial M&A integration is a critical to the success of the deal. When an acquisition closes after it is approved by the anti trust commission, the acquirer has a gargantuan task of bringing together employees of the target organization into the acquirer organization.This is one of the difficult aspects of M&A and

M&A integration create maximum value M&A integration determines the success of the M&A transaction. The integration strategy needs to be aligned with the strategic intent of the deal. For legacy companies, the big challenge is to achieve growth as most of the companies lag behind the global GDP growth. Hence companies look at M&A and

Innovation during M&A integration Buyers speak a great deal about innovation or doing investments on the target organization’s business during the M&A integration in the board room.In reality, rarely do these innovation programs actually happen.The deal teams bake in the innovation or improvements in the target organization in their financial projections, but these innovation points

M&A strategy is difficult Historically M&A strategy was used to supplement and accelerate organic growth.Today organic growth is hard to achieve and largest companies are encountering the stiffest headwinds.Many companies do not have a good success rate in their M&A deals as most of the deals failed to achieve the anticipated synergies announced at the

M&A Due Diligence is critical M&A due diligence is critical. M&A negotiations can be far easier for the acquirer if the deal team has done a detailed due diligence. Many deals have protracted negotiations because the acquirers find it increasingly difficult to get answers to the vital due diligence questions asked by the Finance committee

M&A transactions will increase Despite the global economic slowdown, business leaders continue to target M&A transactions.Reports indicate that more than half of the global companies plan to acquire in the next 12 months.This is because companies are looking to reshape their portfolios even in this global uncertainty. Companies are focusing on M&A in order to

Why is Customer experience important in M&A? When two companies come together in a M&A transaction, it means two sets of customer experience and employee experience need to coexist and this requires both sides to adapt in some way. Companies involved in tech acquisitions gain access to skilled talent, technology, new market or a new

M&A in Payments space The payments industry has witnessed high M&A activity recently. The industry has seen consolidations among the bigger legacy players to compete against the new age digital companies.Analysts expect that the M&A trend would continue in the payments space as the incumbents get ready to redefine their existing business models to withstand

Why communication strategy is important in M&A integration? A successful M&A integration needs to unite and inspire people around a common vision.Invariably the vision would be to achieve the objectives of the deal.To make this happen, smart, carefully timed and executed communications are critical. Companies spend shareholders money to acquire businesses to gain market share

Cultural Due Diligence is important in M&A Most acquirers are generally bad at Cultural Due Diligence. Cultural alignment between the acquirer and target company is very important and determines the overall success of the M&A deal.Recent studies analyzing M&A transactions over the past 5 years have consistently identified two key findings.First finding is very obvious

Digital M&A activity in customer intelligence The digital M&A activity in B2B Digital Marketing segment is continuing to expand.In recent times, marketers are setting higher budgets for Customer Intelligence spending as they are seeing a higher demand for these services. This is surprising because in the past acquirers have shown scant appetite for companies selling

Types of Synergies In a M&A transaction, synergies drive the purchase price.The common synergies that acquirers focus during a deal is Cost Synergies and Revenue synergies. The synergies that can be realized in a deal depends on the deal rationale and the acquisition strategy. It is important to note that not all synergies are equal

Review current M&A Operating Model M&A transactions provide an opportunity for the acquirer to reflect on the performance of their existing operating model – Organization structure, Processes and People to maximize value creation. A M&A operating model requires substantial changes to the existing operating model to deliver the strategic objectives and synergies. Due to the

Artificial intelligence, AI, has broken information silos Artificial Intelligence, AI, has broken information silos. Information silos are one of the major challenges in large organizations and results in major internal issues. In most of the big companies, the left hand does not know what the right hand is doing. Most of the employees would be

M&A Failures of Thomas Cook History is inundated with M&A failures. For instance, Thomas Cook – A leading player in the travel business that was in existence for nearly 180 years collapsed last month.The root cause behind this collapse is not Brexit as widely speculated by the markets. Thomas Cook merged with MyTravel in 2007

M&A Integration is fraught with risks M&A integration are full of risks.Each stage of the M&A cycle from sourcing to Due Diligence to Valuation to signing and closing the deal is complex and risky. At the same time, in this age of digital era where companies are looking to change their business models to compete

Why M&A strategy is important Many companies do not have a M&A strategy. Hence they face a dubious track record in acquisitions. Many companies do acquisition for the sake of doing it and do not have a clear strategic rationale for doing the same. Some companies measure acquisitions in terms of how much it can

Critical questions to ask before every M&A transaction It is necessary to ask critical questions before every M&A transaction. Mergers and acquisitions are invariably the top three options available for executives to accelerate their organization growth. At the same time M&A deals are risky and 65-75% of M&A transactions fail to create shareholder value. Worse,

Rise in Carve-outs transaction In recent years, divestitures have comprised a majority of M&A transactions as firms are increasingly divesting their non-core assets in order to focus on their core businesses.A Carve-out is list of activities required to complete transfer of a business or assets in a divestiture transaction.Even though both buyers and sellers have

Few M&A transactions create value Some M&A transactions deliver value beyond the deal and this do not happen by accident.For these buyers, acquisitions are an extension of their Corporate strategy instead of a sudden opportunity. These acquirers are successful because they invest time and efforts in strategy and do not pursue an opportunity just because

M&A Integration strategy In a M&A transaction, the M&A integration strategy, process and timing would vary when a buyer acquires a company that is substantially different to its core business. Every deal has its own rationale and this rationale should dictate what, when and how to integrate a target business with the acquirer in order

M&A negotiations M&A negotiations are very tricky.Remember the old Wall street adage “Greed is Good”. In the olden days, all negotiations were characterized on zero-sum game. This means that for a negotiation to be a success, one party must win and other must lose. When we extrapolate this theory to M&A negotiations, a seller is

Salesforce acquisition strategy In this blog, we shall discuss about Salesforce acquisition strategy whose revenues from acquisitions are growing at a faster rate than its core business. When Salesforce announced its last financial results, it reported a better than expected earnings which had prompted it to raise its guidance for the current fiscal year. One

Success in M&A deal In this blog, we shall discuss why soft assets – People and Culture are critical to the success of a M&A deal.Historically, more importance in a M&A deal is given to issues like Finance, IT systems and Operations and lesser importance was focused on the softer side of the transaction –

Employee retention post acquisition In this blog, we shall discuss on the steps needed to be taken to improve employee retention of the target company post acquisition.As acquisitions in digital world are done to access the skills and capabilities, employee retention is a critical success factor that determine the success of the acquisition. From employees

Global M&A trends In this blog, we shall discuss on the global M&A trends, how the M&A activity has been so far till H2 2019, what has changed and what new trends has emerged.The scope of this article is limited to IT services industry. Enterprises globally are reducing their capital expenditures by modernizing their existing

M&A Due Diligence This post in continuation with yesterday topic on the importance of conducting comprehensive M&A Due Diligence. The link to the part one of the article is here The other important areas of focus for Due Diligence are: Insurance M&A Due Diligence In an acquisition, the buyer need to review the seller insurance

M&A due diligence In this blog, we shall discuss the importance of conducting a comprehensive M&A due diligence by the acquirer during a M&A transaction. M&A Due Diligence becomes very important in private company acquisitions because the seller is not subjected to scrutiny by the public markets.Hence before committing to the transaction, the buyer should

Large M&A Transactions In this blog, we shall discuss on what it takes to attain success when companies engage in large M&A. Large acquisitions make headlines and trigger wide spread media publicity, but does such deals make financial and strategic sense? Large acquisitions can be classified as those transactions where the deal value is more

Tailoring M&A integration strategy In this blog, we shall discuss on the importance of tailoring M&A integration strategy according to each deal.Every merger or acquisition is different, yet we see many acquirers sticking to the same integration playbook. With advent of more scope deals with acquirers buying targets for access to capabilities and expanding to

Digital M&A In this blog, we shall discuss on digital M&A, Mergers and Acqusitions,  how companies need to have a different strategy when acquiring digital companies as acquisitions involving digital companies are different compared to a conventional scale acquisition. To get most value from their digital acquisitions, synergies play an important role.Intangible drivers like Social

Venture exits – Mergers and Acquisitions or IPO In this blog, we will discuss about the exit options – Mergers and acquisitions or IPO, chosen by the startups that are either self funded or funded by Venture capitalists and whether these exit options are by choice or dictated by the market conditions. For any entrepreneur,

Mergers and Acquisitions negotiations – part 2 This post is the final part of the topic on key issues to be negotiated in Mergers and acquisitions negotiations agreements. The link to 1st part is here In continuation to the previous post the other key issues on mergers and acquisitions negotiations are mentioned below Mergers and

Mergers and acquisitions negotiations In this blog, we shall discuss on the importance of effective mergers and acquisitions negotiations between the buyer and seller involving the sale of the technology company to address issues in business, legal, tax, financial, property and employment liabilities. Lack of effective negotiation can result in uncertainty in the deal getting

Business valuation of an Internet startup In this blog, we will discuss on the business valuation of an internet startup. As the world is moving from offline to an online digital world, all commerce transactions are happening on the internet, which has resulted in more companies moving to an internet business model where majority of

Go-to-market (GTM) strategy in mergers and acquisitions In this blog, we shall discuss on the importance of acquirers evaluating the Target go-to-market strategy (GTM) in mergers and acquisitions to validate if it can help to grow the combined revenues and market share. Companies having successful go-to-market (GTM) strategy have products that are aligned to the

Mergers and Acquisitions integration in Transformational deal In this blog, we shall discuss on the successful mergers and acquisitions integration approach required when acquirers buy companies that are outside their core business competency. Digital disruption has changed the M&A strategy, as acquirers are taking more risks by acquiring companies with different operating and business models.The

Valuation Method – Comparable Companies Analysis In this blog, we shall discuss about valuation method – comparable companies analysis to value target companies in M&A My last post on valuing a company using Discounted Cash flow is provided here Valuing a company using Comparable Companies Analysis primarily looks at how the market has priced similar

Operational due diligence In this blog, we shall discuss the importance of Operational Due Diligence in evaluating a target during acquisition. Besides, we will also enumerate the list of activities to perform effective due diligence. Operational Due Diligence is an integral part of a Due Diligence phase. It involves understanding the target business operations and

Integration management office In this blog, we shall discuss about the importance of instituting an effective Integration Management Office which is responsible for ensuring smoother transition of the target company to the acquirer organization and realize the synergy targets that was envisioned during the pre-deal stage. We shall also discuss on the requisite skills and

Mergers and Acquisitions (M&A) target identification program In this blog, we shall look at building an program to identify a right mergers and acquisitions (M&A) target for acquisition. As M&A is increasingly used as an inorganic growth strategy by companies, acquirers need to build a criteria to identify the right target company for acquisition based

Discounted Cash Flow Valuation In this blog, we shall discuss about the most common method used to value a company – Discounted Cash Flow valuation.This method is used to predict the free cash flow that is available with the company after accounting for Operational and Capital expenditures. This free cash flow to the firm is

Integration planning during due diligence in M&A deal Integration planning during due diligence in M&A deal is vital for its success. Majority of the M&A deals do not achieve the expected success rates and one of the main reasons is inability in identifying value creation opportunities much earlier during the Due diligence. In this blog,

Mergers and Acquisitions (M&A) turnaround strategy Mergers and acquisitions (M&A) turnaround strategy involves acquirers to turnaround the target company performance to add value. Turning around a company is in itself very challenging.Similarly executing an acquisition is also very challenging. When we combine these two, the odds to success are low.Acquirers that have achieved turning around

Change in mergers and acquisitions (M&A) strategy In this blog, we shall discuss on how the mergers and acquisitions (M&A) strategy has changed in 2019 as companies are focusing on vertical integrations to further expand their growth and revenues. This change in strategy explains why Pharmacy companies are acquiring Insurance firms and Cable companies are

Divestitures are important for value creation Divestitures are important for value creation. In this blog, we shall understand the importance of divestitures and four best practices that best acquirers engage in to extract maximum value from their deals. To substantiate this, we shall take the case study of Divestitures of 21st century fox assets to

Integrating a bolt-on acquisition Integrating a bolt-on acquisition is critical. In this blog, we will see how the integration strategy will vary depending on the deal specifics. The integration playbook employed when integrating a larger acquisition cannot be used for smaller deals. The operating model and degree of integration will change depending on the value

Broadcom acquisition of Symantec In this blog, we will analyze the Broadcom acquisition of Symantec for $10.7 Billion and predict whether this transaction would increase the shareholder value. We will further decide on the rationale behind the acquisition, valuation multiples and how the market has reacted to this acquisition. Finally we will take a stab

M&A integration at Cisco In this blog, we shall discuss about the M&A integration at Cisco and how successful acquirers like Cisco have built a consistent integration process which has helped them to quickly realize value from their acquisitions. We shall take the case study of Cisco and analyze some of the best practices followed

Wework Valuation In this blog, we shall discuss about the latest real estate technology unicorn, WeWork valuation which has filed for an IPO. The company is valued at $47B.We will look at the business model of WeWork, its revenue and cost drivers along with its future growth trajectory to assess if the company is really

Large M&A Transactions don’t get closed Large M&A transactions don’t get closed. In this blog, we will discuss about the reasons why many large M&A deals don’t get approvals for closing after the deal is announced, reasons why this happens and how acquirers can address this problem in future. Large M&A transactions don’t get closed

Broadcom platform acquisition strategy In this blog, we will discuss about the Broadcom platform acquisition strategy and how it resonates with conventional Private equity acquisition model. We will also discuss about the success that Broadcom had following this acquisition strategy and predict if this strategy would be successful in Symantec deal. Broadcom platform Acquisition strategy

Re-org structure in M&A In this blog, we will be discussing on the re-org structure in M&A and selecting the right structure post acquisition to capture the maximum value from the deal. A reorg post acquisition is done to align the people, processes and systems of the combined entity based on the strategic objectives of

M&A Deal structure M&A deal structure activity is extremely complex and involves substantial efforts and risks associated with it. After the business identifies the right target to be acquired based on the strategic rationale and for business development purposes, structuring the deal along with using an appropriate acquisition vehicle to acquire the target and how

Success factors in Mergers and Acquisitions deals In this blog, we wil look at success factors in mergers and acquisitions deals. M&A is a core component of a company’s corporate strategy.Studies indicate that M&A produces mixed results and successes.This is because M&A deals are not carried out regularly by the companies and in some cases.When

Separation planning in carve-outs Separation planning in carve-outs is critical. Companies these days are required to constantly monitor their portfolio of businesses to validate they are operating in high growth markets and if all their businesses are aligned to their growth strategy. As market conditions change with disruptions, companies need to constantly work on devising

Negotiations in Mergers and Acquisitions Negotiations in mergers and acquisitions is challenging. One of the biggest success factors for any M&A transaction is to close the deal within the specified time period.Delay by either parties, namely the acquirer or seller will invariably affect the chances of deal succeeding and will result in frustration for either

Corporate Restructuring Many companies restort to corporate restructuring  before deciding to divest a business. The current uncertainty in market environment where technology continues to disrupt the existing business models, has made companies think about reassessing their portfolio of business operations to come to a decision whether they need to change their business models to align

Mergers and Acquisitions Integration Mergers and acquisitions integration approaches determine the success of a M&A deal. Companies need to grow and deliver shareholder value.At the current environment, growth through internal business development had saturated in most industries as they have become matured.Hence M&A has become an important growth strategy for the company to increase growth.

Good Deal in Mergers and Acquisitions A good deal in Mergers and Acquisitions are more preferably been used as a growth strategy by companies over any other strategy.This is further supported by favorable market conditions, cheap capital available and booming stock markets. Not all M&A deals are successful. In fact a majority of the deals

Mergers and Acquisitions Integration Strategy Mergers and Acquisitions integration strategy is a crucial component of the M&A process and is a critical factor to the overall success of the deal.To increase the probability of success, a sound Integration strategy is very important. Integration strategy should be in place before the deal announcement.Post due diligence, when

Unicorn valuation post-IPO There is a dip in unicorn valuation post-IPO. The current rise in private markets with more capital available with Venture Capitalists and Private Equity Firms have contributed to rise of unicorns.In fact some of the firms are decalthons with their valuations exceeding $10B.Firms like Xiaomi and Uber, before it got listed were

Business Model vs. Culture A lot of debate is happening on the priority of Business model vs. culture in M&A integration. Not all M&A deals are successful.Infact almost 70% of the M&A deals have not generated any shareholder value and some have even destroyed value.This means that synergies benefits giving rise to 1+1=3 has resulted

Revenue synergies in mergers and acquisitions Achieving revenue synergies in mergers and acquisitions is challenging. Most acquisitions are done lately to either increase market share and build capabilities to provide additional service offerings that increase revenues.The traditional method of acquiring companies to leverage scale and consolidation by resorting to cost cutting initiatives is no longer

Employee management during post-merger integration Post Merger Integration forms a critical part of the success for any M&A deal.Employee management during post-merger integration is critical. In fact, many acquisitions were not able to derive success due to the failure in integration efforts.The integration forms the final stage of a M&A life cycle.Hence this could be

Introduction M&A deals involve extensive negotiations at every phase of the process.As M&A is a rigorous and costly process, negotiations are required on both the sides of the deal to ensure the deal certainty. From the sourcing stage till the pre-LOI stage, the buyer and seller come together because there is a strategic alignment between

Introduction Valuing a target company in a M&A transaction is the most complex part of the entire M&A process and involves extensive negotiations. This is because the valuation differs in the eyes of the beholder(The buyer and seller).The buyer would look at valuation conservatively and target at the same time would be optimistic about its

Introduction Every living being in this world have a life cycle and are destined to aging process.This truth is applicable to corporate organizations too, who have their own life cycle and are destined to age and get extinct.Although corporate executives and investors would try to prevent this ageing and subsequent decline through different methods, it

Introduction Valuation is the most important part in M&A transaction. It is also the most negotiated activity in a M&A transaction.In the current market environment, especially where more companies are demanding high prices, valuing a target company in M&A becomes far more important.No acquirer wants to overpay for a target and then realize that the

Introduction Favorable market conditions like low interest rates and booming stock markets along with record volumes of cash reserves with corporate firms and dry powder with Private Equity firms have increased competition in the current M&A environment. With record levels of cash available and few quality target companies in the market, there is an intense

Introduction The rise of digital along with the latest technologies like Cloud/ Machine learning and demands from end customers is fueling M&A activity across industries where incumbents are looking to acquire growth and at the same time, protect its existing market share. Payments industry has long been a commoditized business with investments in payments infrastructure

Introduction Mergers and Acquisitions always causes an internal disruption within the target organization that is going to be acquired. Acquisitions generally would involve a restructuring cost within the organizations and this will create an anxiety in the target employees.Most of the target employees would be concerned about their future in the organization post acquisition. This

Introduction In the current economic activity where capital is cheap, cash reserves in companies are high and demand from shareholders to invest the excess capital in inorganic expansions, almost every company from startups to large companies are involved in M&A.Yet many companies fail to achieve the desired value that they had envisaged during the deal

Introduction M&A process is basically a tedious, costly and time consuming process for both the buyer and seller.The buyer and seller invests a lot of resources and time with a hope that the deal would be executed.But still most of the deals do not get executed.This will impact the seller more as they have spent

Introduction M&A as a process is a costly and time consuming activity that involves third party consultants, investment bankers and attorneys. Hence the buyer and seller in the transaction would prefer to have a preliminarily agreement in place at the starting of the transaction on how the deal will be negotiated and proceed further. Once

Introduction Almost all M&A deals involve extensive negotiations between the buyer and seller.The buyer is focused not to overpay for the target business where as the founders of the target are looking to extract maximum money from the exit. Earn-out is one such provision which basically is used to bridge the valuation gap of the

Introduction In a M&A deal, once the due diligence is closed and the buyer decides to proceed with the deal, then Sale and Purchase agreement is drafted either by the buyer or the seller. The SPA agreement would include the purchase price, payment terms and conditions, earn out provisions along with reps and warranties declared

Introduction More companies are using M&A as a tool to capture higher growth by increasing market share and drive higher revenues.One of the underlying assumption when doing a M&A transaction is that the combined value of the target and acquirer post deal would be more than the value of the standalone companies pre-deal.This is termed

Introduction In a M&A transaction, structuring a deal is as important as the strategic rationale behind the acquisition.There are two ways to structure a deal.A buyer can acquire the assets of the seller or the buyer can acquire the stock/equity of the seller shareholders thus retaining the control over the seller. In case of an

Introduction Almost all companies of various sizes and revenues are changing their digital business models to respond to digital disruption.Hence most businesses are at different phases of their digital transformation process to improve the customer experience. Cloud services is of the biggest areas of disruption that companies are focusing on to reduce cost of their

Introduction No industry has seen rapid change in their businesses as Financial services industry.The Financial services industry has been strong adopters of using technology as an enabler to deliver better customer services.From core banking solutions to online banking, Financial services has used technology to automate their backoffice operations, streamline their processes and increase productivity. Advent

Introduction More companies are using M&A as a growth strategy to increase market share.The acquisition strategy adopted by each business to grow its market share is different.Companies acquire businesses that align to their corporate strategy. Previously, most acquisitions were done to increase scale. Companies acquired their competitors to increase their market share and revenues.The rationale

Introduction Over the past couple of days, I have been writing on how a detailed Integration plan is extremely important for the acquirer to capture anticipated deal value and synergies. My first post talked about having a pre-close integration plan ready and started once the deal is announced to prevent any uncertainties that could disrupt

Introduction This post is continuation of my earlier post where I had shared on the key integration activities to done by the acquirer when the deal is announced but not yet closed.Link to article is provided. Now after successfully executing the activities, the acquirer is all set to close the deal subjected to fulfillment of

Introduction Companies use M&A as a growth strategy to build market share, increase revenues, gain entry to new markets/expand in existing markets, get access to new capability and add/strengthen their service offerings. After the company identifies the target to acquire based on the strategic rationale, due diligence of the target is done by the acquirer

Introduction The strategic rationale for an acquirer to do an acquisition is to capture market share, entry into new markets, accessing new technology/capability or adding new product/service offering. As the acquisition rationale in most of the recent deals is to increase revenues as against reducing costs, capturing revenue synergies becomes the critical parameter in integration

Introduction Legacy companies operating in matured industries are struggling to achieve growth organically due to decline in the demand for their core services.This has put pressure on the company management to protect and expand their market share. One of the biggest reason for this stagnation is the disruption of digital with new entrants in markets

Introduction M&A process is extremely complex and costly for both buyers and sellers.In addition to involvement of key resources from both buyers and sellers, both parties also engage the professional services of attorneys, investment bankers and third party consultants to assist them in closing the transaction. This involves huge payments which results in high transaction

Introduction An Important step in any M&A transaction is evaluating the target company and arriving at a Final Purchase price using valuation methods like Discounted cash flow or Earnings multiple and Net Assets approach.The most common way how the deal is structured by the buyer to arrive at a Final Purchase Price is that that

Introduction More businesses are acquiring technology capabilities to compete against emerging technology landscape ,protect themselves from digital threats/disruption and at the same time use technology as a driver to build better products and services for the end customer. One of the key components in acquiring a technology IP is to understand how the underlying technology

Introduction As more companies are paying astronomical prices to buy business, it is essential that the buyer completely understands the target business and the value that he is going to get on the Purchase price.This is even more important for companies involving emerging technology and digital businesses where the acquirer does not have much knowledge

Introduction The global economy has witnessed a significant growth post recession. The continued growth in the corporate sector followed by low interest rates and reduction in corporate tax rates(from 35% to 20%) along with surge in stock market indices have contributed to record levels of cash reserves in corporate balance sheet and access to cheap

Introduction Leveraged Buyouts still continue to be the most preferred deal making structure for PE and other financial acquirers. This can be partly explained by the low cost of debt available due to the low interest rates and with equity rates at all time high. When we look at M&A happening in Technology space; the

Introduction Many companies are using M&A as a growth strategy to acquire businesses to build products/services that can generate long term market growth. In addition, companies have started to reassess their business portfolio to check which of their business are core and non-core to their growth. Hence companies prefer to divest business which are no

During the acquisition when the buyer decides to acquire the target after doing valuation, one of the most important terms put in the LOI would be that the buyer should have reasonable working capital post acquisition to ensure continuity in business operations.This implies that the buyer would not inject any funds from his end or

When the buyer expresses an interest to buy the business of the seller then he expresses the interest towards the bid through Letter of Intent or Term Sheet.In most of the LOI or Term sheet the buyer includes the final purchase price which is based on Cash Free Debt free basis. What is the significance

Mergers and Acquisitions are carried out as a growth strategy to increase revenues or eliminate competitor threats.Although in many cases more focus is spent on how the target company can complement the acquirer in their future growth, the important point that is generally overlooked at the initial stages is the tax consequences on the buyer

During acquisition, the buyer values the seller based on the financials presented by the seller and the future projections that the seller thinks it can achieve.In other words, the buyer pays the seller based on the current and future projected earnings of the target company. In many cases either knowingly or unknowingly the seller tries

M&A activity is increasing globally with record number of deals completed this year. Reason for high M&A activity Due to the low interest rates, borrowing has become cheaper which has led to more money available for Financial acquirers like Private Equity firms to invest their dry powder in buying companies. Reduction in corporate rates combined

Rarely a day goes by without a merger or acquisition announcement. Among all growth strategies, those involving either a merger or an acquisition seem to be favoured despite their high level of risk and uncertainty.

Of late, activist investors are grabbing a lot of negative headlines in the media by floating negative campaigns against the target company. So who are Activist Investors and what is their role? Activist investors are firms that acquire large volume of shares of a company and become minority shareholder thereby getting a voting seat in

Even for experienced deal makers, a first digital acquisition is bound to be an education