Mergers and Acquisitions

These are a few tools and thoughts that will help you with the merger and acquisition process

Due Diligence List

Here is a list in MS-Word and HTML format. When it comes to due diligence a bigger list doesn't make for better results. What makes for better results is focusing on the materiality of data. As such, getting a copy of the terminated 3 year old lease is probably not as important as looking closely at how that last $500K deal was booked, and if revenue was recognized properly.

Due Diligence Checklist in PDF format

Due Diligence List in HTML Format

Mergers and Acquisitions Empty Spreadsheet

Here is an empty spreadsheet - representing the significant financial data you should account for when performing a pro forma analysis of two companies that are to be combined.

Merger and Acquisition Spreadsheet (template) (xls) (right click Save As ...)

I like spreadsheets, but the huge ones (like M&A spreadsheets) can give anyone a headache (when you are on revision 24 of the same spreadsheet). After a while the numbers start to go blurry and your head hurts. In my experience there isn't much you can do about the pain besides having asprin or Tylenol at hand.

Symantec Analysis

Out of Stanford (birthplace of Yahoo!, Google, etc.) there is a great investigative report prepared by Jeff Blackburn, Stephanie Kozinski, and Matthew Murphy under the supervision of Assistant Professor Thomas Hellmann.

Symantec acquired 14 software companies from 1989 through to March of 2001. The hyperlink below will get you an analysis of those acquisitions. One of the biggest take-aways from this paper is the highlight of the risk factor.

Check it out.

Symantec Corporation: Acquiring Entrepreneurial Companies [PDF]

Advice: Ground the Emotion

When a company first starts exploring potential merger and acquisition opportunities it can be a highly emotional affair. "I think we should buy XYZ company" says the V.P. Sales. "They're technology is crap" says the CTO.

One way to help remove the emotion (in even talking about a potential merger or acquisition) is to implement a sponsorship nomination discipline. In other words: whoever sponsors the investment of resources into a potential acquisition, at the executive level, puts their career/bonus/etc. on the line. That gets people sober in a hurry.

If you don't use precedence, at least to some degree, you're a fool. Look at similar acquisitions that were done in the past. Find out what went wrong and what went right. Talk, if you can, to the actual executives or employees that were involved. Penetrate a user group, or user conference, of the company you are interested in. Talk to customers, talk to customers, talk to customers.

Tornado Reports

The Tornado Reports are a tool I used to use for spotting companies that may be of great value to your company yet have a low perceived value from investors.

You can find the Tornado Reports, and what they're all about, at this link:

Tornado Report Archive