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How does one measure a successful acquisition?

Scout Young's Profile

Mergers & Acquisition MetricsI'm looking for mergers and acquisition metrics for defining success.

Answers

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

My first measure (spent quite a lot of time in this area) is the degree to which the post-transaction economics match the pro-forma business case. Secondarily and not trivially, the cultural assessment (people, systems, mission and vision) pre- and post-transaction should not indicate a significant gap. Liabilities, including litigation risk (product, process, employees) should produce no "shock and awe" results, post-close. I think it is always important to have "boots on the ground" staff, as opposed to investment bankers to be there, pre and post.

Topic Expert
Sunil Thukral
Title: Controller/Technical Accounting Advisory..
Company: Consultant
(Controller/Technical Accounting Advisory/ SEC Reporting, Consultant) |

Hi Scout...unfortunately not a simple answer.

You first need to answer the question --- "What was the purpose of making the acquisition?"

Once you have answered this question, you can compare the actual results to what you "originally" planned to achieve.

For example, if the purpose of the acquisition was to increase the sales by x% within six months of the closing date. So now you can compare the actual sales after six months and compare them with pre-acquisition sales amount to see how successful the acquisition really was. I have seen a study some time back that concluded that majority of the acquisitions are not truly successful.

Please contact me through Proformative if you need to discuss more on this topic.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

There are so many reasons for an acquisition ranging in various levels from expansion, acquiring technology, people, distribution networks, IP, sales growth, properties,tax losses, preventing a competitor from growing, etc. And by measuring the outcome against the case study prepared to justify the acquisition, you will answer your question.

However, getting the answers is not always easy due to changing external economic conditions, competitor responses, loss of employees or management acquired, change of plans and motivation, and the time it may take to absorb the acquired benefit. For example, if a business is acquired to its current engineers and IP with a view to integrating this as a feature of a future chip product, it may be a couple of years before the end result has been achieved, and changes in market and competitive conditions and pricing, may result in a functional product that is no longer economic for the opportunity anticipated.

(Agent, JKS Solutions, Inc.) |

I think it is actually pretty simple; did the acquisition achieve what you wanted it to achieve?

So, before you made the acquisition you had a plan; measure your results against that plan.

If there wasn't a comprehensive plan, you'll need to try and forecast what would have happened if you hadn't done the deal. Then you can compare the differential result to the purchase price....

The more interesting question is "how do we get the best out of the acquisition?" to which the answer centers around the people element, and that is all about communicating.

Topic Expert
Dana Price
Title: Vice President, M&A
Company: McGraw Hill Education
(Vice President, M&A, McGraw Hill Education) |

In addition to the great advice above, more on the soft side of the house: Does 1 + 1 now equal 3? Is the culture one that is positive? Is the company firing on all cylinders? Do people want to come to work? Are people passionate about what they do? Did you expect to take costs out of the business, and did you? Is there an increase in shareholder value? Are the stakeholders of the company happy?

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