Want to get bigger, buy out your competition? Before you ‘deep dive’ into the merger and acquisition process, think about these questions first.
Why acquire this company and why acquire it now?
· Is there a client/opportunity that makes this acquisition essential or quasi-essential?
· Is this a compelling target? What is their uniqueness?
· What is the size of the client and what client share does the acquisition target hold?
· Does it fit in with our current (growth) strategy?
· To what level can the organization be grown? What are the biggest challenges to growth?
· Who are the industry leaders in Fla? Is the company considered a client leader?
· What do people say this organization does best?
· What are the possible implications on our organization a year from now if we do not make the acquisition?
Do we know everything we need to know about the seller?
· How and why was the organization started?
· Why is the organization for sale? What is the organization actually selling?
· What keeps the seller awake at night?
· Does the seller own the company outright or are there other shareholders who want to sell?
Is this in line with our investment strategy?
· Does the acquisition fit or conflict with our growth strategy?
· Are we able to fund this acquisition using internal?
· Could we generate a higher return on investment with the capital by investing in organic rather than acquisition growth?
Are any reputational issues addressed?
· Are there reputational issues affecting the acquisition?
· Are there any client or sector specific regulatory or ownership restrictions that would make such an acquisition difficult and/or time consuming?
· If we fail to close the transaction, will there be an adverse impact to our current organization model? Would it result in negative PR? Could a competitor use it against we in discussions with future customers?
What is the quality of the earnings?
· What synergy benefits exist?
· Have they provided management accounts alongside the P&L and Balance Sheet?
· How far into their financial year are they? How certain are they of achieving their projection for this or next year’s forecasted financials?
· Have they provided any assumptions for future projected earnings? What level of detail do these assumptions go to?
Is this an opportunity for good returns?
· Is the expected purchase price reasonable?
· Do returns depend on synergies? If so, are they achievable within a realistic timeframe?
· How comfortable are we with the predicted revenue?
· Will the acquisition block other expansion options?
Are the plans and projections realistic?
· Has the company demonstrated: past forecasting/budgeting accuracy; solidity of assumptions; contracted future earnings; cyclical exposure; quality of management, etc.?
· What is within the organization’s control?
· What is outside the organization’s control?
· Are there any key dependencies (e.g. suppliers, customers, third parties)?
How well do we know the management team?
· What is the existing management team’s track record?
· Do they have a good reputation in their industry?
· Are our cultural values aligned?
· Is our team capable of delivering the projected revenue and profit growth, synergies, and running a larger, expanded organization?
· Who will run the organization?
· Are all the management team looking to continue or are there key members who are not looking post acquisition?
Are there any matters requiring further due diligence investigation?
· Have we taken references?
· What are the key assumptions underpinning the investment case? How can these be tested?
· Have potentially disruptive new technologies, client or regulatory changes been assessed?
· What are the potential ‘left-field’ risks?
