Pricing Issues and Post-Transaction Issues
1 Introduction
Chapters 13 and 14 established what a target entity is worth. They ended with a range: a floor, below which the target's own shareholders should not sell, and a ceiling, above which the acquirer's shareholders are worse off for having bought it. This chapter is about everything that happens between that range and the money.
It covers the two lead outcomes the syllabus places at the end of the valuation section: pricing and bid issues — the form the consideration takes, the terms on which the deal is done, how a cash offer is financed, what is done about the target's own borrowings, and how the price is negotiated — and post-transaction issues — whether the value the valuation promised is actually delivered, how that is measured, and how the acquirer eventually gets out again.
One calculation underlies all of it, so it comes first.
2 The value at stake: post-transaction value
This eleven-minute recording is the only lecture for two lead outcomes. There is no lecture recording for the rest of this chapter yet; read it from the notes.
Pricing and post transaction issues: four notices. Its social-media illustration quotes figures recalled from memory. It says “predator” where it means target, and self-corrects. Its co-insurance sentence is stated the wrong way round — take the direction from this section. And one generalisation about bid outcomes is delivered as a rule. It closes by sending you to a textbook chapter that was 402 words long; this chapter replaces it.
An acquisition is worth doing only if the two businesses are worth more together than they are worth apart. The difference is the synergy, and every other question in this chapter — how much to offer, in what form, whether to repay the target's debt, when to sell the business on — is answered out of it.
VAB = VA + VB + S − C
where VA and VB are the standalone values of the acquirer and the target, S is the present value of the synergies expected, and C is the present value of what it will cost to achieve them — integration costs, redundancy, systems, and the fees of the transaction itself. The costs are part of the calculation, not a footnote to it; a synergy figure quoted gross is not a value.
2.1 Where synergies come from
Type | Where it comes from | How reliable it is |
| Revenue synergy | Selling the acquirer's products to the target's customers and the other way round; access to a distribution network or a geographic market; a wider range that makes the group a more attractive supplier; occasionally, greater pricing power. | The least reliable of the three, and the slowest to arrive. It depends on customers behaving as the plan assumes, and customers are not under the acquirer's control. |
| Cost synergy | Removing duplicated functions — two head offices, two finance departments, two distribution networks; buying power over suppliers; closing surplus capacity; spreading fixed costs over a larger output. | The most reliable and the quickest, because the acquirer controls it. It is also the easiest to quantify, which is why a defensible bid is normally built on cost savings and treats revenue synergies as upside. |
| Financial synergy | A larger, more stable group may borrow more cheaply and carry more debt; surplus cash in one business funds investment in the other; tax losses in one shelter profits in the other. | Real, but usually small and easily overstated. Diversification on its own creates nothing for shareholders who can diversify their own portfolios more cheaply than a company can diversify by acquisition (Chapter 16). |
The three values every pricing question needs
The standalone value of the target — the least its shareholders should accept, because it is what they already have.
The standalone value of the acquirer — the benchmark its own shareholders judge the deal against.
The value of the combined entity — from which the maximum price follows: the most the acquirer can pay for the target's equity is the value of the combined business less what the acquirer was worth on its own.
Everything between the floor and that ceiling is negotiation, and where the price settles decides how the gain is divided. A price at the ceiling gives the acquirer's shareholders nothing at all.
Post-transaction value and the maximum price
A has 20 million shares in issue trading at $6.00. B has 10 million shares in issue trading at $3.20. A expects the acquisition to produce cost savings with a present value of $18 million, and expects to spend $3 million (in present-value terms) achieving them. A is considering a cash offer of $3.80 per B share.
$m | |
Value of A standalone (20m × $6.00) | 120.0 |
Value of B standalone (10m × $3.20) | 32.0 |
Present value of the synergies | 18.0 |
Present value of the costs of achieving them | (3.0) |
| Value of the combined entity | 167.0 |
Less: value of A standalone | (120.0) |
| Maximum A can pay for the whole of B's equity | 47.0 |
The value created by the transaction is $167m − ($120m + $32m) = $15 million, which is simply the $18m of synergies less the $3m it costs to get them. The maximum price is $47m, or $4.70 a share — 47% above B's market price — and at that price A's shareholders would gain nothing.
At the proposed offer of $3.80 a share, or $38 million in total:
$m | |
Gain to B's shareholders ($38.0m − $32.0m) | 6.0 |
Gain to A's shareholders ($167.0m − $120.0m − $38.0m) | 9.0 |
| Total value created | 15.0 |
B's shareholders receive a premium of 18.75% over the market price; A's shareholders keep $9m of the $15m created. Neither figure is right or wrong — they are the two halves of one number, and the negotiation is about where the line falls.
The same deal, paid for in shares
A instead offers 6 of its own shares for every 10 B shares — 6 million new A shares in total. The synergies and costs are unchanged.
$m | |
Value of the combined entity | 167.0 |
Shares in issue after the offer (20m + 6m) | 26m |
| Value per share ($167.0m ÷ 26m) | $6.4231 |
$m | |
B's former shareholders (6m × $6.4231) | 38.54 |
Their gain ($38.54m − $32.00m) | 6.54 |
A's original shareholders (20m × $6.4231) | 128.46 |
Their gain ($128.46m − $120.00m) | 8.46 |
| Total value created | 15.00 |
The share offer is worth slightly more to B's shareholders than the $38m cash offer — but only if the synergies are delivered. Suppose none of them is, and none of the costs is incurred either, so the combined business is worth $152m:
Cash offer of $3.80 | Share offer, 6 for 10 | |
Synergies delivered in full — B's shareholders | +6.00 | +6.54 |
Synergies delivered in full — A's shareholders | +9.00 | +8.46 |
No synergy at all — B's shareholders | +6.00 | +3.08 |
No synergy at all — A's shareholders | (6.00) | (3.08) |
With cash, B's shareholders take their $6m whatever happens and A's shareholders carry the whole of the risk. With shares, both sides carry it in proportion to what they own. Notice the last line: paying in shares reduces A's loss but does not remove it — B's former shareholders own 6/26 = 23.1% of a business worth $152m, which is $35.08m for something that was worth $32m.
A share offer is a promise of shares, not of an amount. Its value moves with the acquirer's share price between announcement and completion, so the figure quoted on the day of the offer is not necessarily what the target's shareholders will receive. Offers are sometimes protected by a collar — an exchange ratio that adjusts within a stated range of prices — for exactly this reason.
3 Forms of consideration
The acquirer may offer cash, its own shares, its own debt securities, a deferred amount contingent on future performance, or — most commonly — a combination. A mixed offer lets different shareholders take what suits them, and lets the acquirer manage how much cash it has to find.
Form | For the acquirer | For the target's shareholders |
| Cash | The cost is certain and known in advance. No shares are issued, so there is no dilution of control and no dilution of earnings per share. But the cash has to be found — from balances, from a new issue, or from borrowing — and borrowing raises gearing and may run into covenant limits. | A certain sum, received now, which they are free to reinvest as they choose. But they give up any interest in the business and in the synergies they are helping to create, and the disposal normally crystallises a chargeable gain, so tax falls due immediately. |
| Shares (a share-for-share exchange) | No cash leaves the business, so liquidity and gearing are unaffected. But existing shareholders are diluted and control may shift; the cost is not fixed until completion; and the acquirer's shareholders share the synergy with the sellers instead of keeping it. The issue needs shareholder authority, and a listed acquirer will need a circular and possibly a new listing. | They keep an interest in the enlarged business and in the benefits it is supposed to produce. What they receive is uncertain in amount and moves with the acquirer's share price. Relief is often available to defer the gain until the new shares are sold. Their holding in the enlarged group will be small and will carry no control. |
| Loan notes or preference shares | Preserves cash and avoids diluting the equity, and interest on loan notes is normally deductible for tax. It adds to gearing and to the fixed servicing burden, and the redemption has to be funded when it falls due. | A fixed, prior-ranking return and a defined redemption date, which suits a seller who wants certainty of income rather than a share of the upside. The return is normally taxed as income rather than as a capital gain, and there is no participation in any growth. |
| Earn-out (deferred contingent consideration) | Part of the price becomes payable only if the target meets agreed targets over an agreed period, so the acquirer does not pay in full for performance it does not receive, and it keeps the selling managers motivated after completion. It is complex to define and it constrains how the acquirer may run the business while the earn-out runs. | The prospect of a higher total price if the business performs, and a way of bridging a genuine disagreement about its prospects. The risk is receiving nothing: the targets are measured on figures the buyer now controls, so the definitions, the accounting policies and the permitted management actions all have to be negotiated. |
Cash or shares? Four questions decide it
Can the acquirer raise the cash without breaching a covenant or moving outside its target capital structure?
What happens to control — how large a block will the target's shareholders hold, and does any existing shareholder's position change materially?
What do the target's shareholders want? An institution usually wants certainty and liquidity; owner-managers may prefer to roll their holding into the enlarged group, particularly if that defers a tax charge.
How confident is the acquirer in the synergies? The more confident it is, the more it should want to pay in cash and keep the gain.
An earn-out is not only a pricing device. Because the selling managers' remaining consideration depends on how the business performs after completion, it is one of the few mechanisms that keeps them behaving like owners once they have been paid — which is a post-transaction benefit obtained through a pricing decision. Questions frequently reward the candidate who makes that link.
4 Terms of acquisition
The price is one term among many, and in a private acquisition it is often not the term that decides whether the deal is a good one. The matters negotiated alongside it are:
The form of the consideration and the exchange ratio — for a share offer, how many acquirer shares are given for each target share, and whether any part is in cash.
The conditions. A public offer is normally conditional on reaching a stated level of acceptances, on competition and regulatory clearances, and, where the acquirer is issuing a large number of shares, on its own shareholders' approval. A bid that lapses because a condition fails costs both sides time, money and credibility.
The warranties and indemnities. The buyer is buying what it has been told it is buying: the seller warrants the position of the business, and indemnifies the buyer against specific identified risks such as a tax enquiry or a piece of litigation. Due diligence and warranties are two answers to the same problem — the seller knows more than the buyer.
How the price is fixed at completion. Either completion accounts are drawn up and the price adjusts for the actual net debt and working capital on the day, or a locked box fixes the price on a historic statement of financial position and the seller undertakes to take nothing out of the business in the meantime.
A retention or escrow — part of the price held back for a period to meet warranty claims.
A restrictive covenant — the seller agrees not to compete with the business, or to solicit its employees or customers, for a defined period and area.
The treatment of the target's debt and of any balances owed to or by the seller's group — the subject of the next section but one.
Management and employees — who stays, on what terms, with what incentives, and what happens to the pension arrangements the acquirer is inheriting.
The timetable, any exclusivity period, and any break fee payable if the transaction does not complete.
Due diligence is the process that produces most of these terms. It is not only financial: commercial (are the forecast revenues credible?), legal (title, contracts, litigation), tax, operational, and increasingly systems, cyber security and sustainability. What it finds does one of three things — it reduces the price, it produces a warranty or an indemnity, or it stops the deal.
5 Financing a cash offer
A cash offer has to be funded, and the funding is examinable in its own right. The sources are the sources of long-term finance from Section B of this syllabus, chosen for a particular purpose and under a particular constraint: a public offer generally cannot be made at all unless the acquirer can demonstrate that the cash is already committed.
Source | What it is | What to say about it |
| Existing cash and short-term investments | Balances the group already holds, or realises from deposits and short-term investments. | Quickest and cheapest — no issue costs, no dilution, no new covenants. But cash is normally held for a reason: working capital, planned capital expenditure, or a buffer against a bad year. Spending it raises the risk of the whole group. |
| A rights issue | New ordinary shares offered to existing shareholders in proportion to their holdings (Chapter 6). | Preserves existing control proportions, and the discount on a rights issue does not of itself destroy shareholder value. But it is slow, needs a circular and usually underwriting, and shareholders may decline to fund an acquisition they do not believe in. |
| A placing or open offer | Shares placed with institutional investors, sometimes with a clawback for existing holders. | Faster and cheaper than a rights issue and needs no underwriting of the same kind. It dilutes existing shareholders, and the authority to issue non-pre-emptively is normally limited. |
| A vendor placing | The acquirer issues its shares to the target's shareholders, who have already agreed that those shares will be placed with institutions for cash. | The target's shareholders receive cash while the acquirer issues equity rather than raising debt. Neat, but it needs a placing to be achievable in the market conditions of the day. |
| Bank debt — a term loan or acquisition facility | A committed facility, drawn at completion and repaid over an agreed term. | Quick, private and — crucially for a public bid — certain. Priced at a margin over a benchmark reference rate, with covenants attached. It raises gearing and financial risk, and the covenants will constrain the enlarged group afterwards. |
| A bond issue or a private placement | Capital-market debt, publicly issued or placed directly with a small number of institutions (Chapter 5). | Longer maturities and fewer maintenance covenants than bank debt, but it needs a credit standing and takes time to arrange. The common structure is a bridge facility drawn at completion and refinanced by a bond issue afterwards. |
| Disposal of assets or of a division | Selling something the group already owns in order to buy something else (Chapter 12). | Self-financing, and it sharpens the group's focus at the same time. But a disposal takes time, and a sale forced by a deadline usually fetches a poor price. |
Four tests for the financing decision
Cost — issue costs, arrangement fees, and the return the new providers require.
Financial risk — what the choice does to gearing, to interest cover, and to the headroom under existing covenants.
Control and dilution — who owns the enlarged group afterwards, and whether any shareholder's position changes materially.
Speed and certainty — can the money be in place by the date the offer must be made, and is it committed rather than merely indicated?
The acquisition and its financing are separate decisions and must be evaluated separately — but the transaction as a whole fails if either one does. A sound acquisition financed in a way that breaches a covenant is not a sound transaction.
A cash offer is not “cheaper” than a share offer because debt costs less than equity. The consideration is a price, and the price is the same amount of value however it is funded. What the financing choice changes is the capital structure and the risk of the enlarged group (Chapter 4) — and, through them, the rate at which the combined cash flows should be discounted.
6 Target entity debt: settle or refinance
The acquirer buys the target's shares, but it inherits the target's borrowings. Two things follow, and questions test both.
6.1 First: the debt determines the price of the equity
A valuation built from the business's cash flows — a free cash flow valuation, for example (Chapter 13) — values the whole business, the enterprise, before any financing. The shareholders own what is left after the lenders have been satisfied. So the more debt the target carries, the less its equity is worth, dollar for dollar.
What the target's debt does to the price
A values B's business — its operating cash flows, before any financing — at $77 million in A's hands. Consider two versions of B with identical operations.
B as it is $m | B more heavily borrowed $m | |
Value of the business (enterprise value) | 77 | 77 |
Less: borrowings | (30) | (45) |
Add: surplus cash | – | 5 |
| Value of B's equity — the most A can offer the shareholders | 47 | 37 |
Same business, same synergies, two different share prices. And note what has not changed: A commits $77 million either way. All that alters is how much of it goes to B's shareholders and how much to B's lenders.
6.2 Second: what to do with the debt after completion
The choice is normally forced, or at least prompted, by a change-of-control clause — a term in the target's loan agreements entitling the lenders to demand repayment if the company changes hands. Where such a clause exists, repayment on completion is not optional and the funding requirement is the equity price plus the debt.
Settle the debt | Refinance the debt | |
| What happens | The borrowings are repaid on or shortly after completion out of group cash or new group borrowing. | The borrowings are replaced by new facilities raised by the enlarged group, usually on different terms. |
| Cash required | The full amount outstanding, on top of the price paid for the shares. | Only the price paid for the shares; the debt rolls over. |
| Effect on the interest charge | The interest disappears entirely, which raises the group's profit after tax — but so does the return foregone on the cash used. | Reduced if the enlarged group is a stronger credit than the target was on its own, which is frequently the case. |
| Effect on the group | Gearing and financial risk fall; covenant headroom improves; but a large amount of liquidity has been consumed. | The debt stays in the group. Gearing is unchanged in amount but the maturities, currencies and covenants can be reshaped to fit the group's target debt profile (Chapter 5). |
| When it is preferred | The group has surplus cash with no better use; the target's debt is expensive or carries restrictive covenants; a change-of-control clause makes repayment compulsory in any event. | Cash is scarce or has better uses; the group can borrow more cheaply than the target could; the interest is deductible and the group has taxable profits to shelter. |
Whichever is chosen, the target's lenders gain from the acquisition. Their debt is now serviced by the cash flows of a larger and more diversified group, so it is less likely to default and is worth more than it was. That gain is paid for by the shareholders, and it is known as the co-insurance effect. It is one reason an acquisition can transfer value from the acquirer's shareholders to the target's debtholders even when the transaction as a whole creates value — and a reason why settling the target's debt on completion is sometimes the shareholders' preferred answer.
Check the change-of-control clauses before the offer is priced, not after. If $30 million of the target's borrowings become repayable on completion, the acquirer needs $30 million more than the offer document says, and a bid financed to the penny will fail at the last moment.
7 Bid negotiation
The valuation gives a range. The negotiation decides the point in it, and therefore how the gain is split.
The floor | The target's standalone value — for a quoted company, its market capitalisation before any bid speculation. Its shareholders can simply keep what they have. |
The ceiling | The value of the combined entity less the acquirer's own standalone value — the point at which the acquirer's shareholders are no better off than before. |
In between | Negotiation. What moves the price within the range is bargaining power, not arithmetic. |
What shifts the balance of that bargaining power:
Whether there is a competing bidder. Nothing moves a price further, or faster.
How badly each side needs the transaction. A seller under financing pressure, or an acquirer that has publicly promised a transformation, negotiates from weakness.
The quality of the acquirer's information. Thorough due diligence lets it argue about the target's forecasts from evidence rather than from suspicion.
How much of the synergy the acquirer is willing to reveal. Every dollar of synergy disclosed is a dollar the seller will ask for.
Whether the offer is recommended or hostile. A recommended offer is cheaper, quicker and preserves the goodwill of the management the acquirer will need after completion. A hostile bid usually costs more and can destroy part of the value it is trying to buy (Chapter 11).
The winner's curse. In a contested auction the bidder that wins is the one that has been most optimistic about the synergies — which is another way of saying it is the one most likely to have overpaid. The defence is to fix the walk-away price from the calculation before the negotiation starts, and to treat it as a limit rather than an opening position.
Two further points that questions reward:
The headline premium understates what is really being paid if the target's share price has already moved on rumour of the bid. The premium that matters is measured against an undisturbed price (Chapters 14 and 17).
A mixed offer is a negotiating instrument, not a compromise. Offering cash and shares — or a cash alternative — lets shareholders with different tax positions and different appetites for risk each take what suits them, which raises the level of acceptances without raising the price.
What a bid-pricing answer needs: the range (floor and ceiling, both calculated); who gains how much at the price proposed; the effect on the acquirer's own shareholders, stated as a figure; the form of the consideration and why; and a recommendation that names the maximum price and says what you would do if the seller refused it.
8 Integration and benefit realisation
The valuation is a promise. The integration is where it is kept or broken, and a synergy that is never delivered was simply an overpayment.
8.1 Why transactions fail to deliver
The integration is managed badly — no plan, no owner, no dates, and two organisations left to work each other out.
The synergies were never there, were double-counted, or were counted gross of the cost of achieving them.
The acquirer overpaid, handing the whole of the gain to the seller in the price.
People leave. Uncertainty after a takeover is corrosive: the employees who can most easily go elsewhere are usually the ones the value depends on.
Customers leave — particularly where the acquisition puts them in the hands of a competitor, or where service falls away while systems are merged.
Management is stretched beyond its competence, especially where the acquisition diversifies the group away from a business it understands.
Cultures do not fit — different decision rights, different pace, different attitudes to risk and to customers.
Events outside anyone's control — a recession, a change in the industry, a financing market that closes just when the group needs to refinance.
8.2 Managing the integration
Decide how far to integrate, and decide it before completion. The answer follows from where the synergies are. Cost savings usually require full absorption; revenue synergies often need only a shared sales effort; and a business that is intended to be sold on later should be kept deliberately separable — which is a real constraint on how much cost can be taken out.
Appoint one person to lead it, with a plan, dates and a budget, running from day one rather than from the end of the first reporting period.
Communicate early, and keep communicating — to employees about what is happening and what it means for them, and to customers and suppliers before they hear it from a competitor.
Retain the people the value depends on through contracts, incentives and, where they are also the sellers, the earn-out.
Align reporting and controls quickly so that the enlarged group is managed from one set of numbers.
Do not lose the base business. Management attention is finite, and the acquirer's existing operations still have to be run.
8.3 Benefit realisation
Benefit realisation is the discipline of proving that the benefits used to justify the price actually arrived. It requires four things for each benefit in the valuation:
A baseline. What the cost or the revenue was before the transaction. Without it, nothing can be demonstrated afterwards.
A named owner in the enlarged group's management structure, not in the transaction team, which will have moved on.
A quantified target and a date — the same figures, from the same model, that supported the price.
Tracking through ordinary management reporting, with the cost of achieving each benefit reported alongside it, because the valuation deducted those costs.
The post-completion audit
Some time after the transaction — typically at the point where the integration plan said the benefits would be complete — the acquisition is reviewed against the case that was made for it: what was paid, what was assumed, what actually happened, and why they differ.
It is the only feedback loop the acquisition process has, and its purpose is to improve the next appraisal rather than to apportion blame for this one. Where the answer is “less than we assumed”, the response is a decision — fix it, restructure it, or sell it. What was paid is a sunk cost and is not a reason to keep a business that is worth more to somebody else.
9 Exit strategies
The routes out of a business — trade sale, secondary buy-out, flotation, sale to management, liquidation — and how to choose between them are set out in Chapter 12, where they are examined from the seller's side. What belongs here is the other half of the syllabus topic: an exit is part of the plan for realising the benefits of a transaction, and that plan is made when the business is bought, not when the owner comes to sell. The two chapters are deliberately not duplicated.
Very few acquisitions are made to be held for ever, and none is made without an implicit view about how long it will be held. Making that view explicit at the outset changes four things:
The price that can be justified. The shorter the intended holding period, the larger the share of the total return that comes from the price at exit rather than from the cash the business generates — so the appraisal becomes highly sensitive to a terminal-value assumption made years in advance, and that sensitivity has to be tested.
How far the business is integrated. A business intended for sale is kept separable: its own management, its own systems, its own contracts and its own financial record. That directly limits the cost synergies available, and the trade-off must be made deliberately rather than discovered at the point of sale.
How the acquisition is financed. Debt maturities and covenant tests are matched to the intended horizon; a five-year plan financed with three-year money creates a refinancing risk that has nothing to do with the merits of the business (Chapter 5).
What “benefit realised” means. For a trade acquirer holding the business indefinitely, the benefits are the cash flows. For a financial investor, the benefit is only realised at the exit, and everything before it is unrealised.
9.1 Exit readiness
A business sells well when the buyer's own due diligence has nothing awkward to find. The conditions can be created years in advance:
A separable and auditable financial record, so that the buyer can see what it is buying without having to unpick group allocations.
No dependence on the seller's group for systems, services, purchasing or a major customer — or, where dependence exists, a transitional services agreement already thought through.
Management who will stay, and who are not the seller.
Contracts that transfer, with change-of-control clauses identified and, where possible, waived in advance.
No unresolved litigation, tax exposure or pension deficit of unknown size.
A credible, evidenced growth story — what the next owner would do with it.
9.2 What triggers the decision to exit
The benefits have been realised and the business is now worth more to somebody else than to its current owner.
The benefits have not been realised and are not going to be; the loss is cut. The amount originally paid is irrelevant to that decision.
The strategy has changed and the business no longer fits it.
An unsolicited offer arrives above the owner's own valuation of the business — which is a reason to sell, not a compliment to decline.
A financial investor's fund is approaching the end of its life, or the group needs cash or covenant headroom elsewhere.
What an exit question is really asking: what is the business worth if we keep it; what is it worth to the best buyer available; what will getting out cost in time, tax, transaction costs and obligations that stay behind; and what will be done with the proceeds. If it is worth more to someone else than to us, the case for selling is made — and Chapter 12 then decides by which route.
An acquisition creates value only if the combined business is worth more than the two standalone businesses — VAB = VA + VB + S − C. The maximum the acquirer can pay for the target's equity is the combined value less its own standalone value; the minimum the target's shareholders should accept is what they already have. Everything between is negotiation, and where the price settles decides how the gain is divided.
The consideration may be cash (certain, taxable now, no dilution, but it must be funded), shares (no cash leaves the business, but the sellers share the synergy and the risk), loan notes, or an earn-out that pays only if the business performs. A cash offer is financed from balances, a rights issue, a placing, a vendor placing, bank debt, a bond issue or a disposal — judged on cost, financial risk, dilution, and certainty of funds by the date of the offer.
The target's borrowings reduce the price payable for its equity dollar for dollar, and after completion they are either settled or refinanced; a change-of-control clause may make the choice for you, and the target's lenders gain from the transaction whichever way it goes.
After completion, the value promised has to be delivered: decide the degree of integration from where the synergies are, manage it from day one, keep the people, and prove the benefits against a baseline with a named owner and a post-completion audit. And plan the exit at the point of purchase, because the intended horizon changes the price that can be paid, how far the business is integrated and how the acquisition is financed — the routes themselves are in Chapter 12.
10 Test your knowledge
Two quick checks before you move on: work through the flashcards to fix this chapter’s terms and definitions, then sit the objective questions for exam-style practice. Both mark themselves and explain the answers as you go.
Pricing Issues and Post-Transaction Issues
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