01 · Recognize

Mergers & acquisitions

Should we buy this business?

You are in this case when

A named target and a price are already in the prompt.
The client is the buyer, and the question is value and risk, not fit alone.

02 · Structure

Which drivers matter?

Should we buy this business?

01
Strategic fit
Why own it?
The objective, the target’s fit and the alternatives to buying.
02
Deal economics
Value versus price
Standalone value, synergies, premium, integration cost.
03
Execution
Can it be delivered?
Integration, retention, systems, regulation and timing.

Buyer value created = standalone value + net synergies − purchase price

03 · Solve

Work the scratch sheet.

Illustrative practice scenarioA target has a standalone equity value of $80m. The purchase price is $100m. Synergies are worth $30m in present value; integration costs $8m in present value. All figures on one equity basis.

What the buyer gets$80m + $30m − $8m = $102m
What the buyer pays$100m
Value created$102m − $100m = $2m
Synergy shortfall that erases it$2m ÷ $30m = 6.7% of forecast synergies

Only $2m of buyer value remains in the base case. A 7% synergy miss erases it, so delivery probability and timing decide the recommendation.

Work backward from an answer

If the answer is “buy”, the synergies must be real, dated and owned by someone. So ask who delivers each synergy and when, before asking whether the price is fair.

04 · Recommend

Make the call in three buckets.

Answer

Do not pay $100m on these terms; offer $92m or walk.

Because · ties to the hypothesis

Only $2m of value survives the base case, and a 7% synergy miss erases it.

Next steps & risks

Diligence the two largest synergies and the integration timeline. Risk: key-customer attrition during integration.

“I would separate strategic fit, deal economics and execution, and distinguish standalone value from buyer-specific synergies.”

Watch for: Do not count synergies twice or mix enterprise and equity values. Keep integration cost and timing explicit.

Log this case in My Harper →

Special sauce

Bring a real company into the room.

growth · Luxury & acquisitionsLVMH

Which functions would you combine after buying a luxury house, and which would you leave independent? Put a savings estimate and a brand-risk test beside each choice.

Read the story →growth · Diversified businessesBerkshire Hathaway

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Read the story →

Three terms to use

Synergy: Incremental benefit from combining businesses beyond their standalone results.
Acquisition premium: Price paid above a stated standalone benchmark.
Due diligence: Testing commercial, financial, operational and legal assumptions before committing.