Case Study

Merger Feasibility Report and Model​

18.05.2022

Client: Two companies involved in the manufacture and distribution of industrial products for mining sector clients (both with revenue ~$10-20m)

Project

Assess the feasibility and benefits of a potential merger between the two companies​.

Project Trigger

Shareholders of the companies knew each other and through discussions believed there was potential value from merging – they decided further investigation was required.

Our Scope​

  • Consider and assess the strategic rationale for a merger between the two companies.​
  • Provide a recommendation to the board if there is merit in pursuing a merger transaction. ​
  • Advise what next steps are required if a merger were to proceed.

Project Outcomes​

  • Agreed with management the relative strengths and constraints of each business and identified where both groups would benefit from a merger.​
  • Quantified the revenue and cost synergies that may be realised from combining the two businesses.​
  • Built a forecast merger model which incorporated standalone forecasts of both companies, a combined forecast, supported by the estimated synergies.

Our Value​

  • Active Directions facilitated the decision making process across the two companies that resulted in a decision to move forward with a merger including recommendations on valuations and shareholder value.​
  • Active Directions identified 4% of additional operational efficiencies and 10% of additional revenue synergies (representing uplift of 36% on combined standalone EBITDA) resulting from the proposed merger.

Top 3 Tips​

Clients that require strategic merger feasibility advice should:​​

  • Understand how their business is positioned, their objectives, challenges and what is required to get to the next level.​
  • Be realistic about their strengths and weaknesses and understand strengths and weaknesses of potential partners.​
  • Be prepared to develop robust financial forecasts that can be used to quantify the impact of different strategic options, or their journey, from partnership, strategic alliance to joint venture and/ or merger.