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Business Models in the M&A scenario

I have not seen any reference to the use of business models in the M&A scenario. I would think this a useful application. In my view there would be 2 premerger models of the organisations which are merging. This could provide an additional tool in the due diligence process. The postmerger model can be contructed prior to merger completion and again would provide a strong platform for debate and ensure consensus of vision for the merged entities.

Has anyone had any experience of using business models in this manner? Has it proved worthwhile? Has it brought a new dimension to M&A activity? What lessons have been learned?

Hopefully we can commence a discussion on this topic.

Kind regards

Philip Galligan

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Permalink Reply by Izam Ryan Bahrin on January 26, 2012 at 5:26pm

This is a good use case for the BMC! Some thoughts:

1. Pre-merger and post-merger (As-is and To-be operating models) biz models could be a tool used for defining, communicating and tracking M&A benefits and synergies. Being able to spot killer biz models early on during the M&A life cycle will be a key differentiator between the winners and the losers.

2. The BMC could be integrated in to the "typical" due diligence process. My thinking is this could be part of Commercial Due Diligence done early on in the M&A cycle.

3. When I conceptualize how the BMC fits in with the whole M&A cycle, I like to tie back the results of the BMC to business valuation. The BMC gives a quick way to prototype and rapidly iterate through different estimates of retained earnings. This can then be the input for a basic valuation model (using profit, ROCE, Growth, WACC)

4. This caluation model can also be used to conduct sensitivity analysis.

The bottom line - BMC can be a good tool to add to the business atrategist's tool box. Getting the big picture out of it, then integrating the BMC insights with other tools and synthesizing something unique ... Ah, now that is really adding value!

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Permalink Reply by Izam Ryan Bahrin on January 27, 2012 at 4:26pm

By the way! Chapter 4 of the book has a section on evaluating business models.

This might be good material for a framework for assessing business models in an M&A deal.

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Permalink Reply by Karl Burrow on January 30, 2012 at 7:01am

This is a very good topic for discussion. I am using the canvas for an ongoing project that is structured around a M&A deal. We illustrated the Pre and post merger activities and scenarios to understand the entire platform and what key areas of focus need attention at the earliest during the lifecycle. Using multiple canvases linked can also be helpful.

I agree with Philp that this should be part of the due diligence phase.

A key learning part is the strong emphasis on the VP section which help all members understand the objectives and value of the deal.

Let's keep this discussion going.

Karl