Whether you are a market analyst, an advisor, a business consultant, or an investor, you may have to provide recommendations for or make your own opinion on an announced M&A to update your strategy, to achieve investment objectives, to strengthen your portfolio, or to make sure the operation is a "good move." Not all Transactions avoid pitfalls, especially when it comes to articulating the rationales and keeping emotions away. As you review the Transaction and share your analyses, ensure that you address the following questions:
First, tackle the strategic rationale for the Transaction:
Was the Transaction an acquisition or a strategic merger? Why?
Did the buyer provide a well-articulated and convincing argument for undertaking this Transaction? Did they have to undertake this Transaction, or could they have afforded to let another party take on the business?
Were the financial benefits of the acquisition adequately covered in presentations, and were they compelling?
Was the integration plan discussed, and were transaction risks identified?
Second, examine the terms of the Transaction:
Was the acquisition appropriately priced? Did the buyer overpay, got a fair price, or purchased the business at an attractive price?
Did the buyer handle the “social issues” (employees, management, directors) in a manner designed to ensure a successful transition and to achieve the strategic objective?
Was the financing of this Transaction a significant undertaking for the buyer? Did it increase financial risk?
Third, analyze the process and investors reactions:
Was this a competitive process? How competitive?
If negotiated, how was the buyer able to secure a negotiated process? Why did it make sense for the seller?
How did investors respond to the Transaction, and why?
In future posts, we will share an example in which we provide answers to these questions using a multi-billion Transaction that couldn't be accomplished.
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