Acquisition Value Assessment

Overview

During the lead up to an acquisition, in addition to providing Customer and Market Due Diligence, Callidon helps clients validate the cost and revenue synergies and other savings opportunities built into the acquisition model. Every transaction differs, but our approach typically includes testing underlying synergy assumptions and building a bottom up estimate of the impact of revenue and cost synergies.

Strategic Challenges

Few companies consistently achieve the original board paper targets when acquiring businesses. This results in returns below the cost of capital and the associated erosion of shareholder value. In an increasingly competitive bidding environment, a greater proportion of anticipated value is monetized by the seller. More than ever, acquirers need a detailed understanding of the cost synergy and revenue potential of a transaction, enabling them to maximize their bids without overpaying.

Callidon works with management to systematically research cost and revenue synergies and develop detailed estimates of their impact. These activities can be as wide ranging as examining consolidation of functions, analyzing new or integrated production facility costs, or researching procurement savings from consolidating vendors. By systematically testing and validating the key assumptions underpinning the valuation, we are able to provide our clients with a greater degree of certainty that the bid they submit is competitive but realistic.

Activities

  • Work with management to develop cost and revenue synergy hypotheses
    • Research each cost savings and revenue opportunity and gather necessary facts
    • Develop model to estimate actual savings
  • Analyze target revenue data and other documents from data room
    • Investigate drivers of revenue growth / decline
    • Analyze price elasticity and evaluate pricing opportunities
  • Size distribution synergies for target’s products
    • Build bottoms-up model of volume and size
    • Where appropriate, develop comprehensive market map for all competitors
    • Total achievable opportunity for target, including price increases and new products