ABI SUPPORTS M&A TRANSACTION WITH IN-DEPTH VALUATION MODEL
A private equity client in the UAE was involved in bolt-on acquisitions for one of its portfolio companies to enhance the company’s services portfolio and grow its geographic footprint.
SCOPE OF WORK
The client needed in-depth analysis and financial model on the company being acquired – to help it in negotiating better – as well as financial model for the combined company to understand all sources of synergies and value enhancement opportunities for the client’s portfolio company.
The specific scope of the work included:
- “As-Is” business valuation of both the companies; valuation based on standalone business growth potential
- “To-Be” business valuation based on potential value of synergy from the combined operations
- Sensitivity of business valuation with changes in key business drivers and macro/industry scenarios
- Sensitivity of enterprise value allocation between stakeholders of both the companies under different price consideration
- ABI deployed a multi-disciplinary team comprising:
- An expert on financial analysis & business valuation to create the financial model incorporating all relevant business drivers
- A sector expert to guide the team on assessing the market attractiveness, competitive dynamics and sources of competitive advantages. The sector expert also guided the team on potential competitive landscape and resultant business growth scenarios for the client’s portfolio company
- Organically build the capability versus acquiring now
- The scenario where another competitor acquires the target company
- An expert on technology to guide the team on existing and evolving technologies in the domain and their commercialization potential.
- ABI team validated the historical financial statements and forecasted projections of the target company based on the company’s current growth, strategic plans and external business environment. ABI team also evaluated the target company’s sales forecasts and market share estimation based on the competitive dynamics, technological landscape and manufacturing capabilities
- ABI analysts created an in-depth valuation model incorporating sources of valuation and synergies
- Macro & industry attractiveness and associated risks
- Business and strategies for evaluating companies’ potential growth curve
- Dynamic financial model incorporating all associated business drivers
- Valuation with scenario analysis based on rigorous benchmarking
- Capital structure analysis for value allocation among stakeholders of both the companies
- ABI team also leveraged the database on operational and valuation multiples from “guideline public companies” and precedent transaction multiples (including control premium paid) to validate their fundamental valuation with market appetite.
- Time-efficient as multiple teams were able to work on different aspects of the deals, making the client’s team to focus on negotiations and meeting while ABI took care of all the research work
- Continuous communication and discussion on interim deliverable meant that the entire deal team was aligned with the same objectives
- Scenario analysis and capital structure analysis – with its value allocation analysis among stakeholders under different scenarios – worked as a key negotiation tool for the private equity team negotiating with the target company
- ABI also delivered M&A rationale report and presentation slides for the consideration of the board members of companies
- The private equity client leverages out analysts and domain experts on project basis thereby maintaining a lean and cost-effective structure
- Focus on data-security and well-defined access structure on the “need-to-know” basis keeps the data and information security as the same level as is found in the internal team