M&A cases

Intuition

An M&A case is a high-stakes "should we buy them?" The romance of a deal, bigger, bolder, market-leading!, seduces executives and candidates alike, which is exactly why a disciplined structure matters. Buying a company is like buying a house that comes with the previous owners still living in it: the sticker price is only the start, and the real cost shows up in the years of making two things work as one.

Your job is to be the clear-eyed advisor asking why this target and is it actually worth the price while everyone else is excited.

Framework

• Strategic rationale. Why this acquisition, why this target, why now? (Access to customers, capabilities, scale, eliminating a competitor.) No rationale → no deal.
• Standalone value of the target. Is it a healthy business at a fair price? Assess its market, economics, and growth.
• Synergies. Cost synergies (remove duplication, gain scale) and revenue synergies (cross-sell, new markets), quantified and discounted for realism.
• Price & risks. Does total value (standalone + synergies) exceed the price paid? Then integration, culture, regulatory, and overpayment risk.

Worked Example

A grocery chain considers buying a meal-kit company. Rationale: defend against home-delivery disruption and own the recipe-to-doorstep flow, plausible. Standalone: the target grows fast but loses money. Synergies: cost (shared warehousing, buying power) is real; revenue (cross-sell kits to grocery shoppers) is promising but speculative. Price: a steep premium that only pays off if the speculative revenue synergies land. Recommendation: pursue only if the price can be brought down or structured with earn-outs, because the deal's value rests on the least certain synergy. You named the rationale, tested the synergies, and tied the verdict to price, exactly the consultant's role.

Now a contrast in discipline. A software firm weighs buying a smaller rival at a 40% premium, justified by "$50M of synergies." The weak candidate nods and moves on. The strong one splits the figure: $30M is cost synergy from merged infrastructure and sales teams, bankable; $20M is cross-sell revenue, haircut it 50%. Risk-adjusted synergies of $40M no longer cover the premium, so the verdict flips to "renegotiate or walk." The math took one minute; the discipline of splitting and discounting is what changed the answer.

In the room

Open by naming the two bars the deal must clear: "I'd evaluate this on whether the acquisition creates more value than it costs. Four pieces: the strategic rationale, why this target, why now; the target's standalone value; the synergies, split into cost and revenue and discounted for realism; and whether all of that clears the price, given the integration risks." Then commit to a start: "Unless you'd rather begin elsewhere, I'd pressure-test the rationale first, if that fails, nothing else matters." The follow-up interviewers love: "So how much should we pay?" Have the formula ready: maximum price equals standalone value plus risk-adjusted synergies, and add that paying right up to that ceiling hands every dollar of value to the seller. Naming walk-away discipline out loud is what separates an advisor from a cheerleader.

Pitfalls

• Accepting the strategic rationale at face value without testing it.
• Taking management's synergy estimates as gospel, haircut them hard.
• Ignoring integration and culture risk, where most "good on paper" deals actually die.