M&A deals can be a powerful tool for boosting your business growth. They can allow you to expand your product range and expand into new markets, as well as create revenue streams you may not have had before. These benefits might not always come to fruition. There are many risks to be aware of when considering M&A.
The structure of the transaction is an essential aspect of M&A. You can make use of the Transaction Assumptions Tab in your model to find an array of Purchase Prices or a specific Purchase Price. Based on this information, you can determine how much cash will be required to finance the transaction and set the appropriate fees for financing the transaction.
After you’ve identified the purchase Price interval or an exact purchase Price then it’s time to calculate the value of the transaction. This requires analyzing expected returns of non-cash components such as cash and equity as well as debt and tangible and intangible asset. It is possible to estimate these figures through your financial models or with back-of-the-nap valuations, such as multiples for industry.
You want to maximize the returns on these non-cash components since it is the only way to earn from your M&A investments. In the past this was known as „economies of scale,“ but it could also be cost synergies that result from a bigger operating size, expanded distribution capabilities, access to new markets and risk diversification.
