Do you really understand the business you are thinking of buying?
Have you worked out the realistic synergies?
What is the right price?
How well prepared are you for the negotiations?
What does all that lawyer speak mean?
Have you developed a clear integration plan in advance?
What is the distraction potential for managing your core business?
These challenges face every executive engaged in an acquisition.
Knowing the answers to these questions will help you and your business make the right choices, make the right decisions and deliver a successful acquisition. These are the questions which Acquisition Essentials answers.
Acquisitions Essentials is the comprehensive and crystal-clear companion to making the right acquisition decisions and executing them well.
It will guide you, step-by-step, through the M&A process. It will help you understand the critical issues and master the critical interventions that make the difference between success and failure.
Table of Contents
- FT Prentice Hall Financial Times
- About the authors
- Publisher’s acknowledgements
- Executive summary
- Rule 1: Do not acquire with cash during an acquisition boom
- Rule 2: The improvements and synergies need to be greater than the premium
- Rule 3: The improvements and synergies we can create need to be bigger than the improvements and synergies rival bidders can create
- Rule 4: Don’t forget learning costs and distraction costs
- Rule 5: The prize from an acquisition needs to be greater than the prize from a joint venture or alliance with the target company (assuming these are available)
1. The foundations
- Bad news...most acquisitions fail
Planning for success
- Strategic and acquisition planning
- Acquisition target evaluation
- Deal management
- Integration management
- Corporate development
2. Finding candidates
- Introduction: have a sound acquisition plan
- Acquisition criteria
- Target identification methods
- Running an acquisition search
3. Preliminary negotiations
- The confidentiality agreement
The letter of intent
- Advantages of a letter of intent
- Disadvantages of a letter of intent
- Enforceability of the letter of intent
4. The integration plan
The golden rules of acquisition integration
- Plan early
- Minimise uncertainty
- Day-one communication
- Be prepared for the obvious questions
- Do not forget the customer
- Do not forget the power of symbolism
- Manage properly
- Soft issues are paramount
- The integration plan
- Post-acquisition review
- The golden rules of acquisition integration
5. Investigating the target
- What is due diligence about?
- When should you do it?
- Be prepared for obstacles
- Remember: the target will have prepared
- How do I know what due diligence to do?
- Who does due diligence?
- What do I do?
- Get the right team
- Brief them properly
- Get the written report presented
- Other points to watch
Commercial due diligence
- Why should I carry out both commercial and financial due diligence?
- What is the CDD process and where does the information come from?
- Meet management
- Information gathering
- What are the key issues to be covered?
- Where does the information come from?
What are the contents of an FDD report?
- History and commercial activities
- Organisational structure and employees
- Information systems
- Accounting policies
- Sales, cost of sales, gross margins
- Cash flow
- Net assets
- Financial issues relating to pension schemes
- Financial projections
- Legal investigations
- Valuation is not best left to the experts
- There is no single number
- The valuation process – a summary
- Valuation is not just about modelling
- Calculating synergies
- Choosing the valuation method
- Use more than one method
1: Discounted cash flow (DCF)
- The process
- The maths
- Free cash flow
- The discount rate
- Terminal value
- 2: Return on investment
- 3: Price/earnings and other profit ratios
- 4: Comparable transactions
- 5: Sector-specific valuation benchmarks
- 6: Impact on earnings per share
- 7: Net asset backing
- The basics
- Starting discussions
- Keeping control
- Dealing with tactical ploys
- Trading concessions
- Splitting the difference
- Dealing with pressure devices
- Unblocking bottlenecks
- Body language
- The green light
- Learn to recognise and return signals
- What to do when ‘win-win’ will not work
8. The sale and purchase agreement
- Why is a contract necessary?
- Deal points
- Timing of the consideration
- Representations and warranties
- Restrictive covenants
- Conditions to closing
Warranties and indemnities
- What is a warranty?
- What is an indemnity?
- Alternatives to contractual warranties and indemnities
- Cross-border issues
- A. Checklist for a financial due diligence investigation
- B. Checklist for working with advisers
- C. Checklist for legal due diligence
- D. Checklist of published information sources
- E. Pre-negotiation checklist
- F. Skills checklist for conflict negotiation
- Title: Acquisition Essentials: A step-by-step guide to smarter deals
- Release date: October 2005
- Publisher(s): Pearson Education Canada
- ISBN: 9780273688617