The situation
An ambitious medical education company was looking to roll up complementary firms in order build out its service offering and market footprint in a fragmented sector. The Company lacked the corporate development resources and analytical abilities to identify, qualify and value prospective targets in their core and adjacent markets. Quanta was engaged by the Board to: 1) translate an investment thesis into a partner presentation 2) spearhead the search for acquisition targets and; 3) to initiate early discussions with prospects. Given management sensitivities around market signaling and timing, there was a need to be discrete and objective yet agile.

What we did

• Defined market ecosystem around core and complementary offerings as well as growth prospects
• Analyzed the purchasing behaviour and pricing dynamics of the buyers to validate the revenue upside and risks
• Reviewed and analyzed 40+ prospects to produce an acquisition short list
• Identified potential risk areas around post acquisition integration, leadership & cultural fit
• Developed a consolidated financial model which included various equity and debt financing models
• Commenced stage one discussions with target firms

Results
We identified a short list of 4 strategic acquisitions with the highest potential for revenue synergies and the best leadership and cultural fit. We were able to secure interest and trust among these firms, which led to each of them getting a Letter of Intent (LOI). The final agreement is currently being negotiated.

The situation
A small private equity firm was considering an investment in an established retail/wholesale concern looking to merge with a competitor (Newco). There were some concerns about the revenue risk due to channel conflict and overlapping brand positioning. In addition, the PE firm was interested in quantifying the revenue upside of a combined product offering for customers and other distributors. We were engaged during the due diligence process to address these questions.

What we did

• Mapped Newco's combined distribution channel and product offerings
• Estimated the revenue and profit impact areas of product & service overlap as well as potential cross sell opportunities
• Analyzed industry trends, pricing trends and the competitive/supplier ecosystem
• Interviewed 20+ customers, distributors and suppliers to gage feedback on Newco's prospects
• Identified other potential risk areas including post merger integration, leadership & cultural fit etc

Results
We identified higher than anticipated revenue and profit risk associated with the transaction. Specifically, revenue cannibalization was likely to be greater than previously estimated. Moreover, the ability to quickly leverage cross sell opportunities would likely be compromised by challenges integrating the two firm's cultures. The deal was never consummated.