Mergers and acquisitions

Deal execution requires qualified legal, tax, and accounting advisers. This structures the commercial thinking and identifies what needs specialist work; it does not substitute for it.

The thesis comes first, and in writing

Before looking at any target: what would an acquisition get us that we cannot build or partner our way to, and why is buying better?

Legitimate theses are specific, a capability that would take three years to build, access to a customer base we cannot reach, consolidation economics in a fragmenting market, a team with scarce expertise.

Illegitimate theses, all common: growth for its own sake, defensive panic, the target became available, and the belief that two struggling businesses combine into a healthy one.

Write the thesis before the target. A thesis reverse-engineered to fit an available company will justify anything.

Screening

Score candidates against the thesis, not against how impressive they are. The best target is frequently the boring one that fits precisely.

Assess cultural and operating-model fit early rather than as a soft afterthought. Integration failure is the most common way deals destroy value, and its causes are visible before signing, incompatible decision-making, different customer commitments, a founder who will not stay.

Valuation framing

Two numbers matter and they are different: what it is worth to you given the synergies you can actually realize, and what you would pay, which must be lower.

Be brutal about synergies. Cost synergies are real and estimable; revenue synergies are usually optimistic and rarely arrive on schedule. Model the deal without revenue synergies and see whether it still works, if it only works with them, it probably does not work.

Name your walk-away price before negotiating, and treat it as binding. Deal momentum is a powerful force and it is not evidence.

Diligence