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.
- [ ] 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)
- [ ] 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 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)
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- [ ] Obsolete and out of date (-6)
- [ ] 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)
- [ ] 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)
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)
- [ ] 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)
- [ ] 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)
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.