Merger Feasibility Report
Assess the feasibility and benefits of a potential merger between the two companies
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
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.
- 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.
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