Deal or no deal: Methods, processes, and models for the new M&A environment

June 2012
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Deal or no deal: Methods, processes, and models for the new M&A environment

At a glance

Consolidation in banking, insurance, and asset management will continue to impact profitability and drive the need for scale yet economic risk is high. Traditional valuation approaches like discounted cash flow, comparables, and multiples, facilitate cyclical M&A activity. Graham and Dodd offers an alternative view for buyers and sellers in all deal environments.

The environment driving consolidation in banking, insurance, and asset management will continue to impact profitability and drive the need for scale. At the same time, economic risk is currently very high which prevents acquiring firms to grow their way out of bad deals.

Traditional valuation approaches like discounted cash flow, comparables, and multiples, facilitate cyclical M&A activity in that these methods often support increasing prices on the way up and then cause acquirers to pull back on the way down. Graham and Dodd offers an alternative view of value that could be leveraged by both buyers and sellers in all deal environments.

Financial institutions can benefit from PwC's multi-phased approach which includes:

  • Rigorous independent assessment, focusing on assessing total deal risk from pre-deal assessment to due diligence, integration, and value realization.
  • Establishment of an independent risk assessment panel.
  • Analysis of pricing risk leveraging Graham and Dodd valuation.
  • Development of leadership alignment on key deal risks and mitigation options facilitate reward-to-risk decision making.