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!
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.
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

Permalink Reply by Karl Burrow on May 17, 2012 at 3:52am

Currently I am working with a  client for 2 objectives using business models.

1. Outside- In  approach  for  foreign acquirers targeting companies using the the canvas for understanding target companies local/domestic model.

2. Pre and Post Merger integration blueprint as part of the due diligence process.

The output is  basically  conceptualizing BMC in the entire M&A cycle, in addition to linking back to the  business valuation results. 

Karl

Permalink Reply by Julien de Salaberry on August 22, 2012 at 6:38am

In addition to the options listed by other contributors, the BMG canvas can be leveraged to define the business development strategy of an organisation where mapping the ToBe canvas will highlight which building blocks are currently weak or non-existent and so need to be "built" via acquisition or partnership e.g. JV

Permalink Reply by Andrew Hurrell on August 23, 2012 at 2:34am

I have just finished using the BMC to compare two organizations looking to merge.  It was very helpful to determine the synergies and gaps, particularly when looking at the To-Be model.  Using some simple color coding, the collective overlaps and gaps were made very evident. These were easily captured and prioritized as part of the integration action plan.

The as-is BMC  models were an intergral part of the evaluation.

Definitely a useful tool for this exercise!

Permalink Reply by Karl Burrow on September 26, 2012 at 6:22am

To all,

Good discussion going on here. I just attended the Asian Venture Capital and Private Equity forum which one of the topic was on business models in the M&A industry. One key point highlighted  was the best way to visualize the as is an To-Be model during the transition process. Yes the BMC can be fully utilized for this effort.  If anyone has any prototypes to share on this I would grateful to view this.

 

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