Friday, January 8, 2010

Review from the Summit: Should You Acquire or Be Acquired? (Part 3)

Now I am going to continue to summarize Hobson Hogan's presentation on whether you should consider being acquired or whether you should acquire another company from Day 1 of the Summit. If you have not read part 1 or part 2 please do so first.

The next topic discussed was the value drivers that affect the outcome of an acquisition (which we also call the "6P Framework"). These include:
  • Personnel
  • Product
  • Process
  • Profit
  • Pricing of Debt/Equity
  • Projections
This is a two-sided framework and the top three elements are on the company side (qualitative) and the bottom three elements are on the numbers side (quantitative). The company side contains qualitative attributes that will bias a value up or down, while the numbers side contains a quantitative measure of the culmination of company attributes and its relationship in its market.

The market outlook was then presented and while Mr. Hogan stated that the market should recover, it will likely not approach 2007 peak levels within the next five years. The recovery will be asymmetric with certain geographies recovering more quickly than others.

He wrapped up his presentation by discussing the financial market factors that affect value. These include:
  • Bank lending standards significantly tightened
  • Use of debt in transactions significantly curtailed
  • Equity out refinancing and home equity loans greatly curtailed
To learn more on how FMI can help you acquire a company or sell your business you can contact Hobson Hogan at

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