some of our clients:
  • Johnson and Johnson
  • YPO
  • Bristol-Myers Squibb
  • US Army
  • Air New Zealand
  • WB
  • Red Bull
  • Frito Lay
  • Mercedes-Benz
  • Delta Airlines
  • bp

Custom M&A Business Plan


handshakeA successful merger or acquisition involves specific steps prior to executing the transaction and integrating the target company. Custom merger and acquisition (M&A) business plans involve special expertise and due diligence.

1. Determine M&A Objectives

In any merger or acquisition, the combined companies expect to produce net cash flow and financial returns greater than the sum of the individual companies. The two companies complement each other’s strengths and compensate for weaknesses. Available synergies are the motivation for a combination. The value of the synergies determines the price of the merger or acquisition.

From the start, management needs to focus on how an acquisition will create synergies. Properly crafted measurable objectives optimize the likelihood of a successful transaction and minimize wasted effort. Common objectives for pursuing mergers and acquisitions include:

  • Achieve Economies of Scale

Merging with or acquiring a company that serves essentially the same markets can potentially offer economies of scale in manufacturing, distribution, sales and marketing, and administrative functions. For example, if a manufacturer acquires a competitor with manufacturing plants that produce the same products and/or serve the same markets, the combined companies could reduce the number of plants while serving current and future demand. The production capacity of the combination must be larger than the two company’s original output. Underutilized capacity, more efficient equipment, and better processes are some reasons for this acquisition.

Rationalizing administrative functions is often a basis for combining companies. Headquarter costs are targeted for reduction.

  • Expand Product or Service Offers

A merger or acquisition can potentially expand the combined company’s product or service offers. For example, an office equipment and supplies distributor might acquire a distributor of laptop computers and personal electronic devices to create value. The additional products could increase sales through existing channels with minimal additional expense.  An accounting firm might consider acquiring a company that installs accounting software to expand its services to existing clients and add new clients.

  • Enter New Markets

Entering new markets is another common motivation for combining companies. For example, a company that purchases a foreign company to establish a presence in a foreign market enters a new geographic market.

Entering a new product or service is different from expanding product or service offers. Typically, the new market has no relationship or only a slight relationship with the company’s current business. For example, initially served as a premier online retail book store. During the past decade, has dramatically expanded the number of market sectors it serves.

  • Maintain Competitive Position

A company may seek to acquire a competitor to optimize its market share.

  • Stabilize the Company

A company with erratic financial performance may acquire a healthier company with the expectation that the combination will stabilize financial results and over time, lead to increased profitability and cash flow.

While mergers and acquisitions can create synergies in many ways, it is important to prioritize the company’s objectives for a merger or acquisition. The priority is based on the company’s needs for increased growth and financial returns. Focus on the company’s top objective supports disciplined decisions and maximizes the potential for success. Additional synergies created in other ways simply enhance value creation.

2. Qualify M&A Targets

Having determined the optimum priority objective, the company’s next step is to identify and qualify targets. Targets are identified in a number of ways. Competitors, suppliers, and even customers could be appropriate targets. If the company has an existing relationship with a potential target’s senior management, direct contact may be appropriate. Alternatively, the company could enlist another party to gauge interest in a merger or acquisition. An outside executive who has a relationship with the target, an investment banker, a legal firm, or even a industry trade association could be deployed. Other sources include private equity firms, angel investors, and business brokers.

Once there is agreement to investigate a merger or acquisition, the formal due diligence process begins. This critical step enables the company to evaluate the target’s competitive position, confirm that the target could address the company’s primary objective, assess the target’s financial condition, and identify material risks and opportunities. Due diligence qualifies the target and requires a number of steps:

  • Meet with the target’s senior executives to discuss broad parameters of a potential merger or acquisition, outline the due diligence process, discuss access to employees, facilities, accounting and other records and customers. Set a schedule for completing due diligence and submitting an initial offer to merge with or acquire the target.
  • Meet with functional area senior managers – manufacturing, distribution, sales and marketing, finance and accounting, information systems.
  • Tour facilities.
  • Analyze the target’s records including production, asset maintenance, distribution, sales volumes and pricing, inventory records,  accounting and financial information (e.g. general ledger, bank accounts, accounts receivable and payable, fixed assets and capital investments, short and long term debt).
  • Meet with major customers (and smaller customers, if practical) to obtain customer opinions on the target’s products and services and  quality of operations. Ask customers for their expected volume of business with the target over the next three to five years.

Call (424) 204-6133

Monday to Friday, 8:30 am – 5 pm PST or

schedule a call

to discuss your current situation and most important objectives.

3. Follow A Custom Optimized M&A Business Plan

Using the information obtained from due diligence, it is critical for management to follow a comprehensive M&A business plan. An all-embracing plan serves as the basis for negotiations with the target and financing parties.

An optimum M&A business plan focuses on how the acquisition will maximize value through synergies created by combining the company and the target. The plan might include an analysis demonstrating that acquiring the target:

  • Creates economies of scale resulting in reduced operating expenses.
  • Increases volume by expanding products and services (versus current and projected trends).
  • Increases volume by entering new markets.
  • Enables price increases above expectations.
  • Profit optimization

An Optimal M&A Business Plan includes the following:

  1. Executive Summary:  The executive summary includes the following:
  • An outline of the strategic objectives for acquiring the target, an estimated value of expected synergies,  the assumptions made regarding synergy opportunities.
  • A summarized financial return analysis that indicates the company’s return targets are equaled or exceeded.
  • A discussion of potential risks and opportunities.
  • A schedule for executing the transaction.
  • A discussion of integration issues including potential cultural differences with the target.
  1. Competitive Landscape: Identifies the target’s primary products/services, markets and competitors. Describes the target’s business model and strategy (low cost/high volume; premium price/premium quality; unique product attributes), the fit with the company’s objectives, and industry trends.
  1. Volume and Revenue: A discussion of volume and revenue that includes analysis of the company and target individually, and the combined companies. Explanation of expected synergies. Detailed discussion of each product, service and customer that accounts for a significant amount of volume or revenue (e.g., 10%). Description of marketing and sales plans.  Graphic presentations of volume and revenue increase understanding of the business of the company, the target, and how a combination would create value.
  1. Operating Expenses:  Identify major expenses and state the basis for planned amounts (i.e., variable with volume, fixed over medium to long term, new or increased because of specific event). Identify expected synergies.
  1. Capital Expenditures: Provide a schedule of capital expenditures over the plan horizon, identifying significant projects. State the rationale and expectations for each significant project.
  1. Financial Statements: Provide an integrated balance sheet, income statement and cash flow statement for three (3) years of actual results and plan/forecast for the plan horizon. Include summary statements and planning assumptions in the body of the plan and detailed financial statements as an attachment.
  1. Sources and Uses: Provide a schedule indicating the sources of funds for the transaction and the uses of those funds.
  1. Estimated Financial Returns: Include a presentation of the estimated financial returns, based on the planned financial statements. If necessary, summarize the presentation in the body of the plan and include a detailed presentation as an attachment.
  1. Financial Ratios:  Provide financial ratios based on lender requirements post transaction over the plan horizon.
  1. Optimal Transition Plan:  The detailed optimized transition plan enables the management team to stay on the optimal track and avoid being distracted with suboptimal issues and unimportant busy work. Provide detailed plan to best integrate the two companies, optimize culture change, and the business model.

An optimal merger and acquisition business plan provides the estimated value of the target and the company’s price offer. This document is the basis of negotiation with the target. As the target must be acquired for a value that meets the company’s financial return objectives, the company must be highly confident that the synergies reflected in the business plan will be achieved.

Our seasoned professionals stand ready to assist you in developing your optimal business plan.

# # #

A distinguished member of the business plan writing team, Tom Loftus, MBA has served as the Chief Financial Officer of two companies and Senior Vice President, Finance / Treasurer of Genesee & Wyoming Inc., a mid-size company listed on the New York Stock Exchange. Mr. Loftus has created numerous business plans and developed financial models for startup financing, acquisition opportunities, project and corporate financing transactions, government grant and loan applications and capital authorization requests.

Mr. Loftus is proficient in corporate valuations, operations planning, obtaining grant and loan funding and organization design for finance and accounting. He has extensive experience negotiating purchase and sale agreements and long term supply agreements with private companies, debt and equity financing agreements with commercial bankers, investment bankers and government agencies.

Rosalene Glickman, Ph.D. is the creator and best-selling author of Optimal Thinking, the basis of peak performance and value optimization. Dr. Glickman oversees select M&A business plans.

Our business plan writing team consists of seasoned executives and financial professionals dedicated to value optimization.

Call (424) 204-6133

Monday to Friday, 8:30 am – 5 pm PST or

schedule a call

to discuss your current situation and most important objectives.

5 Responses to “Custom M&A Business Plan”

  1. Ellen P says:

    After our team read your article, we clarified our objectives. When should we contact you for the acquisition business plan?

  2. Sandra J says:

    Very informative article. We will need a business plan to move forward. We are brainstorming how to make contact with our target company. Do you help with this?

  3. Brian K says:

    Your business plan and consulting during our recent acquisition was invaluable. Your team thinks and breathes optimization. We’ll be back for the next one. Thanks to you all.

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