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Merger & Acquisition Value Creation

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Money gets left on the table in M&A, when people do a poor job of thinking through how a merger will create incremental value, over and above the sum of the parts. Or when they miss the most promising target.


Who is our M&A Value Creation service for? Science- & technology-based businesses, which:
  • seek an acquirer which values them for strategic reasons, and want to command a premium value — greater than an industry-standard multiple of revenue or earnings; or
  • seek acquisition targets which combine a good strategic fit and an attractive Return on Investment.

What challenge does this service address? It is a truism that many M&A transactions fail to live up to expectations. While there are often execution issues, we believe that many of these suboptimal outcomes occur because of a lack of focus on the detailed upfront analysis of how two businesses will mesh to make a combined company that is more valuable than the sum of the parts. Here are two examples.

Sellers: “Strategic valuation” is elusive
When an emerging growth venture is acquired, there is typically a big increase in valuation if the acquirer sees the target as having significant strategic value — rather than being a simple financial acquisition, with a value related to an industry-standard earnings multiple.

Unfortunately, many emerging ventures fail to take full advantage of this potential strategic value premium — either because they fail to identify companies for whom they represent a truly strategic acquisition; or because they articulate poorly the true strategic impact that they can have on the future of the acquirer’s business.

Buyers: Finding the “gems” is hard
On the flip-side of the transaction, large businesses often have trouble separating the wheat from the chaff among the many similar-sounding startups out there. All too often this leads to acquisitions that fail to live up to expectations. Or, to waking up one day and realizing your competitor has gained a huge advantage as a result of last-year’s acquisition of a startup that your company overlooked (or passed on).

Objectives To help science- & technology-based companies, on either side of the M&A transaction process, create a “1+1=3” scenario — in which combining two companies creates a business considerably more valuable than the sum of its parts.

Benefits for sellers
  • Identify the short list of companies that ought to see significant strategic benefit from an M&A transaction with your company; and
  • Articulate clearly, for each such strategic acquirer, how the two companies would fit together, and why the resultant business would be worth more than the sum of the parts — and why you deserve a strategic valuation, rather than one based on a standard earnings multiple.
Benefits for acquirers
  • Find those rare acquisition target gems, that help you reach otherwise unattainable strategic goals — such as accelerating growth; breaking into hot new markets; or leapfrogging the competitors with innovative technology.
  • Decide how your company can accelerate its long term growth through targeted acquisitions;
  • Find the targets that have the potential to add significant long term incremental value to your business, and figure out how to meld them into your current business.

Our approach Our approach involves an unusual blend of analysis, strategic advice, and roll-up-the-sleeves, hands-on help in execution in support of your team.

We get excited about M&A combinations that lead to combined revenues (and profits) that are greater than just the sum of the two original revenue streams — typically as a result of product, market or business model overlaps and complementarity.

We work closely with your internal management team, over a number of months. We can support both the M&A activity and the subsequent integration. Our focus is to help figure out what the overall M&A strategy should be, which companies make sense as targets, how to articulate the value of the combination of the two companies, and how to mesh the businesses post-acquisition.

While we do not act as a “broker”, and our services exclude solicitation, negotiation or execution of a securities transaction, we are happy to collaborate with such transactional experts as part of the overall M&A team.

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