Standardizing the deal modeling process to enhance value creation

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Overview

Management faces difficult decisions every day, especially in the world of acquisitions. Overpaying and failing to realize the value of target companies is frustrating and damaging to the business and to its shareholders. Following the best in class approach to deal modeling can help buyers avoid the numerous pitfalls in acquisitions. There are two components: the model itself and the process. Both are critical to successful negotiations and execution of an acquisition.

 

deals

Our approach to deal modeling

Our approach provides a comprehensive perspective on a deal model when evaluating a target. We take a step back from the entire value proposition and analyze the target’s standalone value. Understanding how the market perceives the target compared to management’s view is a crucial step to avoid overbidding. 

  • Our approach starts with the standalone view, which is the equivalent to the target continuing business as usual without any transaction considerations.
  • Next is the market participant view, in which transaction assumptions are included from the perspective of any acquirer in the market.
  • Finally, the acquisition view is specific to the acquirer’s expectations for synergies. These synergies often take the shape of internal synergy initiatives specific to the acquirer’s business.

 

deals

How our approach enhances decision making

  1. Assesses deal value and bridges the standalone view of a target to the acquisition view (standalone + synergies)
  2. Establishes accountability and receives buy-in from all relevant functions (FP&A, CFO, M&A, Treasury, Tax)
  3. Standardizes reporting and efficiently communicates results

By having the right model and process in place, the deal model becomes more than just a yes/no tool for acquisitions and enables you to:

  1. Improve negotiations for a more favorable outcome
  2. Encourage positive behavior
  3. Follow through on synergy initiatives
  4. Execute deals more efficiently

Use this process to make key decisions with confidence and minimize commercial and technical risks.

Contact us

Aashish Rajguru

Principal, Deals, PwC US

Steven Chin

Director, Deals, PwC US

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