Interactive Modeling for Mergers & Acquisitions
From OrgChart.net
Contents |
Overview
The process of merger and acquisition merger and acquisition(M&A) is daunting, but can result in the birth of great organizations if handled well. Transformational events such as these bring with them completely new scenarios and radical changes. Interactive modeling is a tool which when incorporated into this process helps in aiding planning and effective decision making. Companies can use modeling tools at every stage of the M&A process to create, compare and analyze diverse “what if” scenarios. Such levels of preparedness to meet challenges greatly propel an organization’s growth.
Pre-sale Analysis
Interactive modeling allows for real-time creation of multiple scenarios using available data on the organization, not only from various sources but also by consolidating inputs available from several locations, if the organization has a global presence. In the pre-sale stage the buyer can use this data analysis to understand its own requirement better and arrive at the company that is the best fit for acquisition. These must include parameters such as annual sales, expected purchase price, financial structure and ownership, among others.
An assessment of personnel requirement at this stage itself would be beneficial. In case the purchase is aimed at acquiring technological advantages, detailed analysis about acquiring its technical experts, as well as costs and ramifications of integrating the technology must be considered. The advantage of interactive modeling is that it allows for inputs from several ends and is able to project scenarios early on. It also minimizes chances of loss through oversight. Likewise, the seller can get a solid grip on things and make internal improvements before the company is put up for sale. Legal structure set in order, financial reports balanced, operational plans standardized and a workforce firmly and suitably matched to jobs are some things to ensure.
Due diligence
Zeroing in on the right firm is vital or it could cost the seller as well as the buyer dearly- the seller as his enterprise value is greatly shortchanged, and the buyer, as a wrong choice could saddle him with a huge liability. Interactive modeling comes in most handy at the stage of due diligence, which is when sensitive information and data are revealed for assessment. Access to customer records, financial and legal records, information regarding sales, workforce, operations and marketing is made available. Making sense of such vast data in a short time is facilitated by modern charting software. Sellers become highly vulnerable at this stage. This is a drawback that can be handled by defining the boundaries of secrecy in the initial letter of intent. This is where the software provides them an edge as access to critical information can be restricted.
At this stage the buyer also gets a true picture of the target company’s internal profile. Sellers get a chance to peek into the books of buyer as well, to establish creditworthiness in case it agrees to future promises as a mode of payment. Assessing the buyer's company data using efficient analytical applications can help the seller assess the risk in doing so.
Post-sale Integration
Even at the negotiation stage, the soundness of the business proposition as well as legal propriety must both be examined to result in a good deal. The biggest challenge, however, comes when the deal has been closed, when differing personalities, competencies and cultures come in contact. Unless there is a proper plan ready in place to align right people with the right jobs and ultimately align the plans with the larger organizational goal, many deals that look good on paper can flounder in reality. Post-sale integration can be visualized effectively using charting software well in advance and can dismiss potential trouble.
