Business Acquisitions: Building a Business Case

Business Acquisitions: Building a Business Case

Creating a solid business case is a critical first step in any acquisition. It allows management to assess potential benefits, opportunities, risks, and costs before committing resources. A well-prepared business case not only reduces the risk of making a poor investment but also serves as a structured decision-making tool for management and the board.

Below is an overview of the key elements that should be included in an acquisition business case:

1. Executive summary

• Overview – A concise summary of the acquisition opportunity, the target company, and the key recommendations.
• Acquisition rationale – The main strategic and financial reasons why the acquisition makes sense.

2. Strategic rationale

• Strategic fit – How the acquisition supports the company’s long-term goals and vision.
• Synergies – Potential cost savings and revenue growth, and how these can be realized.
• Market advantages – The expected impact on market position, competitiveness, and growth.

3. Target company profile

• Business description – Overview of the target’s operations, customers, suppliers, and workforce.

4. Financial analysis

• Valuation – Initial valuation, methodology, and key assumptions.
• Investment calculation – Expected investment size, including purchase price, due diligence, and integration costs.
• Financing – Proposed financing structure (equity, debt, etc.) and the impact on capital structure.

5. Operational analysis

• Integration plan – Outline of how the target will be integrated, with timeline and responsibilities.
• Processes and systems – How operations and IT systems will be harmonized.
• HR and culture – Workforce structure, company culture, and plans to retain key employees.

6. Risk analysis

• Risk identification – Key risks (market, operational, financial, regulatory).
• Risk management – Strategies for mitigating risks, including contingency plans.
• Sensitivity analysis – Testing the impact of changes in critical financial assumptions.

7. Due diligence

• Scope – Areas to be reviewed (financial, legal, operational, etc.).
• Advisors and costs – External expertise required and estimated costs.

8. Timeline

• Phases – Milestones and deadlines for completing the acquisition.
• Integration – High-level plan for post-closing integration.

9. Final recommendations

• Conclusion – Summary of the findings and overall recommendation.
• Decision points – Key approvals required from management or the board.

Conclusion

A well-prepared business case provides a comprehensive view of the strategic, financial, and operational implications of an acquisition. It ensures that management and the board have a solid foundation for making informed decisions and increases the likelihood of a successful transaction.

At FLB Partners, we support clients throughout the entire acquisition process — from strategy and business case development to negotiation and integration. Contact us today to learn how we can help your company build a robust business case for growth through acquisitions.