Case Study

Merger Feasibility

17.03.2022

Client: Four companies involved in the provision of pumping solutions for commercial and residential sectors (all with revenue ~$30-60m)

Project:

Assess the feasibility and benefits of a potential merger / joint venture between the commercial businesses of the four companies

Project Trigger:

There was an opportunity for the companies to benefit from a national approach, greater scale and resulting revenue and cost synergies by working together under different models (eg a joint venture of their respective commercial businesses or full merger). Discussions regarding this idea had taken place between the shareholders and they decided to seek an independent view on the options available.

Our Scope

  • A feasibility analysis, supported by financial model to assess the feasibility of a merger/JV between the three companies – this was later extended to include a  fourth company.
  • Provide recommendations to the clients if there was merit pursuing a merger/JV and advise next steps to proceed.

Project Outcomes

  • Agreed with management the strategic benefits of a combination and analysis of the different options.
  • Quantified the revenue and cost synergies that may be realised from combining 1) the entire entities and 2) just the commercial businesses of each company.
  • Built a 3-way-forecast merger model which incorporated standalone forecasts of both companies and a combined forecast, supported by the estimated synergies.

Our Value

  • Active Directions identified 10% of additional operational and 11.3% of additional revenue synergies resulting from the proposed merger.
  • Active Direction facilitated the decision making process leading to consensus and a roadmap forward for the merger.
  • Active Directions continued our role as independent advisor through the merger process.

Top 3 Tips

Clients that require strategic merger feasibility advice should:

  • Be open-minded to consider different alternatives that will achieve their strategic objectives 
  • Be prepared to undertake detailed historical financial analysis to categorise revenue and costs consistently to present an accurate picture of what a merged group or JV could look like in the future.
  • Communicate frequently with merger partners to ensure a transparent process, allowing to reach a consensus view on the best option.