The Data Institute Acquisition Manual

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Volume 3

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ACQUISITION MANUAL for THE TARGET COMPANY

6
Corporate Development
7
Product Management
8
Overseas Development
9
Product Distribution & Service
10
Advertising + P.R.
16
New Technology Primers
17
Physical Process & Orders
18
Competition Analysis
19
Product Perceptions
20
Customer Perceptions
Financial
Industry
Markets
Products
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB

Volume
3

 

Financial Controller's Balance Sheets

Primary emphasis for the Financial Controller's is the Operating and Cost Critical activities of the Company in terms of Balance Sheet implications.

Rigorous examinations of 12 Acquisition Financing Scenarios, being the implication of the cost of capital (for the acquisition) on the future Profit and Loss of the Company, enables the understanding of the acquisition capital costs involved.

One major consideration for any predator is the cost of acquisition finance in the short and medium term and this section looks at the various possibilities and dangers, the effects of debt interest rates, inflation, revenue failure and cash-flow.

Further sections view the possibilities of Cost Structure Improvements which may help to alleviate the cost of acquisition and/or to increase profitability and return on investment.

Incisive and frank opinions on the future profitability of the Company are shown.

The tactics outlined in these scenarios are objectives for all incoming financial management - beware however, sometimes these plans have unexpected consequences when fully observed and all too easily a company can fall into heavy loss.

 

  1. Acquisition & Capital Cost Financing Scenarios

  2. Cost Structure Improvement Scenarios

  3. Industry Norms & Scenarios


1

The Target Company

 

ACQUISITION + CAPITAL COST BASED BALANCE SHEET FORECASTS


The ACQUISITION + CAPITAL COST BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the Capital Costs decisions available to the financial management of the industry.

The Balance sheet forecast given shows the effects of Capital Cost Financing and the impact of this burden on the profitability of the acquisition.

Acquisition & Capital Cost Financing Scenarios

  • Base Forecasts : Base Market Scenarios

  • New Equity Issue Scenarios

  • Bank Borrowing: Base Scenarios

  • Bank Borrowing: 3% Inflation Scenarios

  • Bank Borrowing: 6% Inflation Scenarios

  • Bank Borrowing: 9% Inflation Scenarios

  • Bond / Debentures Scenarios

  • Asset Sales: 5% of Assets Scenarios

  • Asset Sales: 10% of Assets Scenarios

  • Asset Sales: 25% of Assets Scenarios

  • Self Generated Funds: Worst Scenarios

  • Self Generated Funds: Best Scenarios

  • Trading Credit Extension & Margin Reduction Scenarios

Financial Controllers in the Company will have, in both the short-term and the long-term, crucial decisions to make regarding the cost of financing the acquisition costs plus subsequent cash-flow and profitability. These decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate 12 of the most important factors and provide balance sheet forecasts for each of the scenarios.

 

Financial Comparisons: Base Macro Economic Forecasts

 

Target Company

Base Reference Industry

 

MEDIAN REVENUE FORECAST: Financials

MEDIAN REVENUE FORECAST: Margins & Ratios

BEST REVENUE FORECAST: Financials

BEST REVENUE FORECAST: Margins & Ratios

WORST REVENUE FORECAST: Financials

WORST REVENUE FORECAST: Margins & Ratios

MEDIAN ECONOMIC FORECAST: Financials

MEDIAN ECONOMIC FORECAST: Margins & Ratios

BEST ECONOMIC FORECAST: Financials

BEST ECONOMIC FORECAST: Margins & Ratios

WORST ECONOMIC FORECAST: Financials

WORST ECONOMIC FORECAST: Margins & Ratios

 Financial Definitions

 

Financial Comparisons: Acquisition Cost Scenarios

 

Target Company

Base Reference Industry

 

THE TARGET COMPANY FORECASTS

NEW EQUITY Scenarios: Financials

NEW EQUITY Scenarios: Margins & Ratios

BANK BORROWING: BASE Scenarios: Financials

BANK BORROWING: BASE Scenarios: Margins & Ratios

BANK BORROWING: 3% INFLATION Scenarios: Financials

BANK BORROWING: 3% INFLATION Scenarios: Margins & Ratios

BANK BORROWING: 6% INFLATION Scenarios: Financials

BANK BORROWING: 6% INFLATION Scenarios: Margins & Ratios

BANK BORROWING: 9% INFLATION Scenarios: Financials

BANK BORROWING: 9% INFLATION Scenarios: Margins & Ratios

BOND / DEBENTURES Scenarios: Financials

BOND / DEBENTURES Scenarios: Margins & Ratios

ASSET SALES: 5% of Assets Scenarios: Financials

ASSET SALES: 5% of Assets Scenarios: Margins & Ratios

ASSET SALES: 10% of Assets Scenarios: Financials

ASSET SALES: 10% of Assets Scenarios: Margins & Ratios

ASSET SALES: 25% of Assets Scenarios: Financials

ASSET SALES: 25% of Assets Scenarios: Margins & Ratios

SELF GENERATED FUNDS: WORST Scenarios: Financials

SELF GENERATED FUNDS: WORST Scenarios: Margins & Ratios

SELF GENERATED FUNDS: BEST Scenarios: Financials

SELF GENERATED FUNDS: BEST Scenarios: Margins & Ratios

TRADING CREDIT EXTENSION & MARGIN REDUCTION: Financials

TRADING CREDIT EXTENSION & MARGIN REDUCTION: Margins & Ratios

FORECAST FINANCIAL SCENARIOS

NEW EQUITY Scenarios: Financials

NEW EQUITY Scenarios: Margins & Ratios

BANK BORROWING: BASE Scenarios: Financials

BANK BORROWING: BASE Scenarios: Margins & Ratios

BANK BORROWING: 3% INFLATION Scenarios: Financials

BANK BORROWING: 3% INFLATION Scenarios: Margins & Ratios

BANK BORROWING: 6% INFLATION Scenarios: Financials

BANK BORROWING: 6% INFLATION Scenarios: Margins & Ratios

BANK BORROWING: 9% INFLATION Scenarios: Financials

BANK BORROWING: 9% INFLATION Scenarios: Margins & Ratios

BOND / DEBENTURES Scenarios: Financials

BOND / DEBENTURES Scenarios: Margins & Ratios

ASSET SALES: 5% of Assets Scenarios: Financials

ASSET SALES: 5% of Assets Scenarios: Margins & Ratios

ASSET SALES: 10% of Assets Scenarios: Financials

ASSET SALES: 10% of Assets Scenarios: Margins & Ratios

ASSET SALES: 25% of Assets Scenarios: Financials

ASSET SALES: 25% of Assets Scenarios: Margins & Ratios

SELF GENERATED FUNDS: WORST Scenarios: Financials

SELF GENERATED FUNDS: WORST Scenarios: Margins & Ratios

SELF GENERATED FUNDS: BEST Scenarios: Financials

SELF GENERATED FUNDS: BEST Scenarios: Margins & Ratios

TRADING CREDIT EXTENSION & MARGIN REDUCTION: Financials

TRADING CREDIT EXTENSION & MARGIN REDUCTION: Margins & Ratios

 

 Financial Definitions

 

 


2

Financial Comparisons: Cost Structure Scenarios

 

COST STRUCTURE BASED BALANCE SHEET FORECASTS


The COST STRUCTURE BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company  and the industry using a number of assumptions relating to the financial decisions available to the management of the industry.

The Balance sheet forecast given shows the effects of the types of Cost Structure Improvements which Financial Management at the Company is likely to recommend.

Cost Structure Improvement Scenarios

  •  Materials & Energy Cost Scenarios

  •  Payroll & Staff Cost Scenario

  •  Administration Cost Scenarios

  •  Capital Cost Scenarios

  •  Plant & Equipment Cost Scenarios

  •  Sales & Marketing Cost Scenarios

  •  New Product & New Technology Cost Scenarios

  •  Depreciation & Capitalization Scenarios

  •  Short Term Borrowing Scenarios

  •  Long Term Financial Scenarios

  •  Financial & Debt Servicing Cost Scenarios

  •  Trading & Operating Margins & Profitability Scenarios

Financial Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the cost structure improvements, margins and profitability. These decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate 12 of the most important factors and provide balance sheet forecasts for each of the scenarios.

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

THE TARGET COMPANY FORECASTS

MATERIALS & ENERGY COST Scenarios: Financials

MATERIALS & ENERGY COST Scenarios: Margins & Ratios

PAYROLL & STAFF COST Scenarios: Financials

PAYROLL & STAFF COST Scenarios: Margins & Ratios

ADMINISTRATION COST Scenarios: Financials

ADMINISTRATION COST Scenarios: Margins & Ratios

CAPITAL COST Scenarios: Financials

CAPITAL COST Scenarios: Margins & Ratios

PLANT & EQUIPMENT COST Scenarios: Financials

PLANT & EQUIPMENT COST Scenarios: Margins & Ratios

SALES & MARKETING COST Scenarios: Financials

SALES & MARKETING COST Scenarios: Margins & Ratios

NEW PRODUCT & NEW TECHNOLOGY COST Scenarios: Financials

NEW PRODUCT & NEW TECHNOLOGY COST: Margins & Ratios

DEPRECIATION & CAPITALIZATION Scenarios: Financials

DEPRECIATION & CAPITALIZATION Scenarios: Margins & Ratios

SHORT TERM BORROWING Scenarios: Financials

SHORT TERM BORROWING Scenarios: Margins & Ratios

LONG TERM FINANCIAL Scenarios: Financials

LONG TERM FINANCIAL Scenarios: Margins & Ratios

FINANCIAL & DEBT SERVICING COST Scenarios: Financials

FINANCIAL & DEBT SERVICING COST Scenarios: Margins & Ratios

TRADING & OPERATING MARGINS & PROFITS Scenario: Financials

TRADING & OPERATING MARGINS & PROFIT : Margins & Ratios

FORECAST FINANCIAL SCENARIOS

MATERIALS & ENERGY COST Scenarios: Financials

MATERIALS & ENERGY COST Scenarios: Margins & Ratios

PAYROLL & STAFF COST Scenarios: Financials

PAYROLL & STAFF COST Scenarios: Margins & Ratios

ADMINISTRATION COST Scenarios: Financials

ADMINISTRATION COST Scenarios: Margins & Ratios

CAPITAL COST Scenarios: Financials

CAPITAL COST Scenarios: Margins & Ratios

PLANT & EQUIPMENT COST Scenarios: Financials

PLANT & EQUIPMENT COST Scenarios: Margins & Ratios

SALES & MARKETING COST Scenarios: Financials

SALES & MARKETING COST Scenarios: Margins & Ratios

NEW PRODUCT & NEW TECHNOLOGY COST Scenarios: Financials

NEW PRODUCT & NEW TECHNOLOGY COST: Margins & Ratios

DEPRECIATION & CAPITALIZATION Scenarios: Financials

DEPRECIATION & CAPITALIZATION Scenarios: Margins & Ratios

SHORT TERM BORROWING Scenarios: Financials

SHORT TERM BORROWING Scenarios: Margins & Ratios

LONG TERM FINANCIAL Scenarios: Financials

LONG TERM FINANCIAL Scenarios: Margins & Ratios

FINANCIAL & DEBT SERVICING COST Scenarios: Financials

FINANCIAL & DEBT SERVICING COST Scenarios: Margins & Ratios

TRADING & OPERATING MARGINS & PROFITS Scenario: Financials

TRADING & OPERATING MARGINS & PROFIT : Margins & Ratios

 

 Financial Definitions

 

 

 

3

The Target Company

 

INDUSTRY NORMS


Norms for the Product industry are shown in this section. This represents the major industry sector data for the Company and the industry and as such forms the basis of comparison.

Only the most critical factors should be compared with the various scenarios given as industry averages can at best represent an indication and not a specific point of measure.

Reliance on Industry Norms are often used by analysts in order to support theories and suppositions and these are in turn used for investment scenarios. In fact Industry Norms or Averages are not tangible as they combine and manipulate data from companies in wide ranging activities and thus much of the data is superficial.

Much of the benefit in the analysis of Industry Norms is to use the data to provide guide-lines or parameters which can be seen to define and identify the target industry sector.

Since these Industry Norms should be representative of the entire industry it is wise to provide an average which encompasses all the major countries in the trade cell.

  •  Base Forecasts : Base Market Scenarios

  •  Materials & Energy Cost Scenarios

  •  Payroll & Staff Cost Scenario

  •  Administration Cost Scenarios

  •  Capital Cost Scenarios

  •  Plant & Equipment Cost Scenarios

  •  Sales & Marketing Cost Scenarios

  •  New Product & New Technology Cost Scenarios

  •  Depreciation & Capitalization Scenarios

  •  Short Term Borrowing Scenarios

  •  Long Term Financial Scenarios

  •  Financial & Debt Servicing Cost Scenarios

  •  Trading & Operating Margins & Profitability Scenarios

  • New Equity Issue Scenarios

  • Bank Borrowing: Base Scenarios

  • Bank Borrowing: 3% Inflation Scenarios

  • Bank Borrowing: 6% Inflation Scenarios

  • Bank Borrowing: 9% Inflation Scenarios

  • Bond / Debentures Scenarios

  • Asset Sales: 5% of Assets Scenarios

  • Asset Sales: 10% of Assets Scenarios

  • Asset Sales: 25% of Assets Scenarios

  • Self Generated Funds: Worst Scenarios

  • Self Generated Funds: Best Scenarios

  • Trading Credit Extension & Margin Reduction Scenarios

 

 

Industry & Operational Norms: Scenarios

 

Target Company

Base Reference Industry Norms

 

Target Company

The Company – Product Launch

The Company – Median Forecast

The Company – Best Forecast

The Company – Worst Forecast

INDUSTRY NORMS

INDUSTRY NORMS – Product Launch

INDUSTRY NORMS – Median Forecast

INDUSTRY NORMS – Best Forecast

INDUSTRY NORMS – Worst Forecast

 


THE TARGET COMPANY OPERATIONAL FORECASTS

MATERIALS & ENERGY COST Scenarios : Norms

PAYROLL & STAFF COST Scenarios : Norms

ADMINISTRATION COST Scenarios : Norms

CAPITAL COST Scenarios : Norms

PLANT & EQUIPMENT COST Scenarios : Norms

SALES & MARKETING COST Scenarios : Norms

NEW PRODUCT & NEW TECHNOLOGY COST Scenarios : Norms

DEPRECIATION & CAPITALIZATION Scenarios : Norms

SHORT TERM BORROWING Scenarios : Norms

LONG TERM FINANCIAL Scenarios : Norms

FINANCIAL & DEBT SERVICING COST Scenarios : Norms

TRADING & OPERATING MARGINS & PROFITS Scenario : Norms

NEW EQUITY Scenarios : Norms

BANK BORROWING: BASE Scenarios : Norms

BANK BORROWING: 3% INFLATION Scenarios : Norms

BANK BORROWING: 6% INFLATION Scenarios : Norms

BANK BORROWING: 9% INFLATION Scenarios : Norms

BOND / DEBENTURES Scenarios : Norms

ASSET SALES: 5% of Assets Scenarios : Norms

ASSET SALES: 10% of Assets Scenarios : Norms

ASSET SALES: 25% of Assets Scenarios : Norms

SELF GENERATED FUNDS: WORST Scenarios : Norms

SELF GENERATED FUNDS: BEST Scenarios : Norms

TRADING CREDIT EXTENSION & MARGIN REDUCTION : Norms


FORECAST INDUSTRY NORM SCENARIOS

MATERIALS & ENERGY COST Scenarios : Norms

PAYROLL & STAFF COST Scenarios : Norms

ADMINISTRATION COST Scenarios : Norms

CAPITAL COST Scenarios : Norms

PLANT & EQUIPMENT COST Scenarios : Norms

SALES & MARKETING COST Scenarios : Norms

NEW PRODUCT & NEW TECHNOLOGY COST Scenarios : Norms

DEPRECIATION & CAPITALIZATION Scenarios : Norms

SHORT TERM BORROWING Scenarios : Norms

LONG TERM FINANCIAL Scenarios : Norms

FINANCIAL & DEBT SERVICING COST Scenarios : Norms

TRADING & OPERATING MARGINS & PROFITS Scenario : Norms

NEW EQUITY Scenarios : Norms

BANK BORROWING: BASE Scenarios : Norms

BANK BORROWING: 3% INFLATION Scenarios : Norms

BANK BORROWING: 6% INFLATION Scenarios : Norms

BANK BORROWING: 9% INFLATION Scenarios : Norms

BOND / DEBENTURES Scenarios : Norms

ASSET SALES: 5% of Assets Scenarios : Norms

ASSET SALES: 10% of Assets Scenarios : Norms

ASSET SALES: 25% of Assets Scenarios : Norms

SELF GENERATED FUNDS: WORST Scenarios : Norms

SELF GENERATED FUNDS: BEST Scenarios : Norms

TRADING CREDIT EXTENSION & MARGIN REDUCTION : Norms

 

Industry Definitions

 

 


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