Case Study

Merger Feasibility Report

02.03.2022

Client: Two companies involved in the distribution of allied health and medical related products to health-related specialists and organisations (revenue of ~$20m and $5m respectively)​

Project

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

Project Trigger

Shareholders who owned 100% of the larger company had recently invested in 40% of the smaller company with third party shareholders owning the other 60%. They wanted to explore the benefits from merging the two companies into one group and focusing on a single business. They decided further investigation was required and hired Active Directions to assist

Our Scope​

Consider and assess the strategic rationale for a merger between the two companies.​

Consider the valuation impact on the client’s shareholdings​

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 included the growth potential (revenue) and estimated synergies.​
  • Calculated the impact on overall shareholder value.

Our Value​

Active Directions conservatively, identified 7.5% of additional operational efficiencies and 20% of additional revenue synergies through a proposed merger (representing EBITDA uplift of 100% on combined standalone EBITDA)​

Active Direction facilitated the board decision-making process leading to consensus and a roadmap forward for the merger.

Top 3 Tips​

Clients that require strategic merger feasibility advice should:​​

  • Spend time with their adviser to articulate the key aspects of their company’s business model, strategic objectives for their company and their shareholder goals.​
  • Take time to develop a robust financial forecast in conjunction with their adviser.​
  • Understand the strengths and weaknesses of both companies involved – this is important to support the case for or against a merger transaction