Solutions » Small and Medium Business

Before I came back to Little Rock, I worked for Intel Capital, the world’s largest corporate venture organization.  I was a member of Intel’s core mergers and acquisitions team as the valuation specialist and worked on a total of $4B worth of deals that went up to the Board of Directors level or beyond. 

Intel had developed very effective methods for valuing, structuring and managing their acquisitions based on the McKinsey approach to valuation.  

CFO has adapted a similar process for evaluating and managing acquisitions for its clients that we feel is extremely powerful.

In essence the methodology involves establishing the value drivers of the deal, basically those things that were critical determinants of why you were doing the deal, what you were paying for and what you had to accomplish with the combined entity after the deal was done. 

We build up a valuation model before the deal is done around those value drivers to help you get comfortable with the cost of the deal (which would include operating losses going forward).  The idea of course is to quantify the value of the deal vs. the cost.

This methodology might also suggest more effective ways to structure the deal to enhance value or minimize risk of value destruction.  For example, you may install performance payouts over time to the key employees aligned with the value drivers.

Going forward the same model used to value and structure the deal is used to become the operating model (and budget).  This assures that you have a seemless process for value creation and harvesting.

As you likely know, more than 50% of acquisitions are subsequently determined to be failures.  This inefficiency is due to errors in estimating the value of the deal, structuring the deal and most importantly with integration of the deal.

In short, with CFO Network you’d have a powerful partner on board who could seemlessly help you develop your acquisition capability as a core competency… even a secret weapon.

–Allen