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DevelopmentCorporate
DevelopmentCorporate
Contents
• What is an M&A Strategy
• Strategy Development Process Overview
• Determine Business Plan Drivers
• Determine Acquisition Financing Constraints
• Develop Acquisition Candidate Lists
• Build Preliminary Valuation / Return Models
• Rate / Rank Acquisition Candidates
• Review / Approve Acquisition Strategy
• DevelopmentCorporate Overview
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What is an M&A Strategy?
• Roadmap for your firm’s
corporate development efforts
• Translates strategic business plan
into a list of target acquisition
candidates
• Provides a framework for
evaluating acquisition candidates
• Enables management team,
board of directors, and investors
to get on the same page
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M&A Strategy Process
• Determine Business Plan Drivers • Build Preliminary Valuation
– How can your strategic business plan Models
be accelerated or more successful via – What are the initial estimates of
M&A? acquisition cost? What returns could
• Determine Acquisition Financing be produced?
Constraints • Rate/Rank Acquisition Candidates
– How can you fund acquisitions? – How do various acquisition
What returns must be achieved? candidates rank in terms of impact to
Who approves funding? business and feasibility of closing
acquisition?
• Develop Acquisition Candidate
List • Review & Approve Acquisition
– What specific private and public Strategy
companies are you interested in – Do all of the critical stakeholders
acquiring? (executive team, board, & investors)
agree with strategy and priorities?
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1. Determine Business Plan
Drivers
Translate your company’s strategic
business plan into a set of drivers and
requirements that your M&A strategy
will address
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Business Plan Drivers
Extract key information from your firm’s strategic business plan
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What markets do you want to be in? Supply Chain Related Markets
Plan Make Distribute Sell Service
Demand Planning Manufacturing Planning Inbound Logistics Sales Forecasting Returns / Exchanges
Apparel Assortment Planning Manufacturing Scheduling Inventory Management Shelf Assortment Warranty Service
Planogram Planning Inventory Management Carrier Capacity Management Price Management Field Service
Floor Planning Inbound Logistics Fleet Management Trade & Promotion Mgmt Loyalty Programs
Space Planning Production Control Outbound Logistics Point of Sale
Spend Management Quality Control Store Replenishment Markdown Management
Procurement Outbound Logistics Vendor Managed Inventory E-Commerce
Reverse Auctions Cost Accounting Warehouse Replenishment Consumer Credit & Payments
Order Management Supplier Payments Transportation Procurement Advertising Management
Supply Chain Network design Supplier Performance Mgmt Freight Audit & Payment Labor Management
Supply Chain Optimization Warehouse Management Global Trade Management Loss Prevention
Product Lifecycle Management Supplier Payments
Product Data Management
= solid growth
= flat to low growth
= flat to declining growth
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What share do you want of each market?
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What products/technologies does your roadmap require?
Build
Buy
• Identify specific products or technologies that your strategic product roadmap requires
• Determine timeline when solution has to be available to achieve market share targets
• Honestly assess the time, costs, resources, and risks associated with build options
• Recognize that ‘buy option’ may not yield a solution that is 100% match with your
team’s vision of the market requirements
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What geographies do you want to operate in?
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What types of people, skills, & experiences do
you need?
• For example:
• Specific technologies like AJAX, social media APIs,
non-relational databases, MapReduce, Hadoop, etc.
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What financial targets do you wish to achieve?
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Do you need to pre-empt your competitors?
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How much risk are you willing to take?
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How Big is Your War Chest?
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Understand the Hurdles
• CFOs, Board of Directors, Investors, Debt Holders all
have criteria by which they evaluate potential acquisitions
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3. Develop Acquisition
Candidate List
Identify the specific public and
private companies that you are
interested in acquiring
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Build Your Initial List
• Identify acquisition candidates by:
• Market research (Gartner, AMR, IDC)
• Public stock research / analysts
• Competitor sections of public company 10-K’s
• Recommendations from employees
• Referrals from investment bankers, attorneys,
board members, investors
• Develop summary profile for each company
• Target markets
• Key products/services
• Revenues
• Profitability
• Enterprise Value
• Geographic footprint
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Researching Private Companies
• Researching public companies is easy – 10-Ks,
Proxy Statements, Investor presentations contain
the bulk of the info you need
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4. Build Preliminary Valuation
Models
What are the initial estimates of
acquisition cost? What returns could
be produced?
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Preliminary Valuation Models
• Preliminary valuation models provide you with
key metrics to help understand the costs and
return potential of a specific acquisition
• A sample valuation and return models are presented on the next pages
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Sample Quick Valuation Analysis
QAD as of 9/10/09
• Sample analysis of ERP Enterprise Value
Equity Value 113.3
Company QAD Cash
Debt
(40.6)
16.9
Enterprise Value 89.6
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5. Rate/Rank Acquisitions
Company A
• Rating/Ranking of acquisition candidates Company D
lets you understand the relative impacts
of specific acqusitions Company G
Acquirability
dimensions
• Acquirability – the relative price required $250M+
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6. Review & Approve Acquisition
Strategy
Socialize acquisition strategy and
receive feedback/concurrence from
key stakeholders
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Review & Approval
• Prepare summary briefing of strategy Acquisition Strategy Presentation
(See table of contents on right) • Executive Summary
• Acquisition Strategy Drivers
• Schedule and deliver briefings to: • Target Markets & Market Share
• Executive team • Products/Technologies
• Board of Directors • Geography
• Key investors/debt holders • People / Skills
• Financial Targets
• Consolidate feedback and produce final • Competitive Pre-Emption
strategy package • Risk
• Funding Constraints / Metrics
• Review/revise strategy each quarter. Do • Acquisition Candidate List
a major update in conjunction with annual • Preliminary Valuation / Return Models
strategic planning • Strategic Matrix
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What’s Next
This is the first in a series of presentations on Merger & Acquisition basics.
The remaining posts in this series will cover:
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DevelopmentCorporate
DevelopmentCorporate is a strategic corporate development
advisory firm for enterprise and mid-market technology
companies. We assist management teams, board of
directors, and investors in updating their merger, acquisition,
and divestiture strategies and then we provide tactical
support for the implementation of those strategies. We
also provide support for strategic initiatives such market
assessments, competitive intelligence updates,
product/service portfolio analysis, etc. Finally, we have
significant experience in guiding large scale organizations
through corporate restructurings to either take advantage
of new market opportunities or respond to changes in
market conditions.
www.developmentcorporate.com
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