Validating the Acquisition Plan
About the play
This play is designed to validate the acquisition plan before proceeding with the transaction.
Preparation
Before acquiring another company, buyers must ensure the transaction will bring value to the parent company. However, professionals often rely on strategic assumptions and worse, emotions.
Every time the idea of acquisitions comes up, execute this play to validate the acquisition plan and increase the certainty of success before committing to more resources.
People
Corporate Development, Analysts, CEO, and business leaders.
Difficulty
Medium
Materials
Time
30 minutes
Running the Play:
Surveying customers
Conduct surveys to understand what your customers think of your product. Employ different surveying methods and do not hesitate to learn from them face-to-face. The goal is to have continuous conversations to identify clear trends.
Industry trend analysis
Validate customer insights with outside perspectives. Engage with third-party consultants to conduct broader surveys and gather insights from outside the customer base. Gather as much data as possible.
Partner v/ Build v/ Buy analysis
After validating the demand, perform a build-or-buy analysis. Evaluate your existing partners and your in-house capabilities and see if it’s feasible to develop the technology or capability yourself.
If the analysis suggests that building the solution isn't viable, it’s time to consider buying. Calculate the costs, including engineering, project management, UI design, and timeline, and factor these into the deal price.
Formulating the strategic rationale
The next step is to explore potential targets and stress test the strategy with a proof of concept. This involves selecting a sample of customers to try the new product or service to gauge its viability.
In-depth company analysis and product demos
This step involves a deeper analysis of potential targets, focusing on the company's talent, culture, and capability. Product demos play a crucial role in revealing the product's potential and the team's dynamics, expertise, and cultural fit.
Drafting a detailed memo
Foster an honest conversation with the target company. Openly discuss the synergy between the two companies. Document everything in a detailed memo, including risks, price, terms, and the deal’s return on invested capital.
All shareholders must feel confident about the future and understand the strategic rationale.
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