You have a Board Paper to write summarizing the benefits of acquiring your smaller competitor. You want to make an impact with a one page executive summary of why it’s such a good deal. What do you cover? Here some questions you need to answer:
- What is the total cost of the acquisition pre and post earn out?
- What is the logic of the price? – covering:
- Profits adjusted to reflect your ownership
- Multiples used -PE basis, Price to Sales, Price to Net Assets.
- If an earn out deal is proposed, highlight the initial PE and demonstrate that exit PE is lower when the earn-out completes.
- Previous deals done in the industry with prices & multiples paid.
- Highlight specific savings if any you are building them into the logic. Note who is leading the cost savings project and the timetable for achieving them.
- Highlight the ROI covering the total acquisition costs.