2. Background
• 27 years enterprise software • Led 4 major acquisitions that
space closed for over $200 million in
• Served as trusted advisor for four consideration. Played a
public company boards of supporting role in 4 other
directors as well as three large acquisitions that closed for over
private equity firms $300 million in consideration.
• Developed over 325 in-depth • Led 8 major divestitures that
analyses of public and private generated over $30 million in
technology company acquisition consideration
candidates • Led numerous cross border
• Led the approach, initial projects, especially in Western
management meetings, and due Europe, Korea, and Japan
diligence for over 40 acquisition • Led over 12 major corporate
projects restructuring projects
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3. Agenda
• Summary
• Key Concepts
• Process Overview
• Acquisition ‘Teaser’ Presentation
• Open Discussion
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4. Summary
• Product managers are • Today’s discussion is
uniquely suited to analyze designed to arm you with
acquisitions some key best practices you
• They understand markets, can employ
products / services, • Before pitching any
competitors, marketing, acquisition, you need a
development, sales, baseline acquisition strategy
support, & finance • Check out: How to Build an
• Most product managers M&A Strategy
don’t understand how
execs, boards, & investors
evaluate potential
acquisitions
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5. Key Concepts
(aka Stuff You Need to Know but Probably Have Never Been Exposed To in Depth)
• Financial Literacy
• Enterprise Value
• Accretion/Dilution
• Valuation Metrics
• Acquisition Currencies
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6. Financial Literacy
• Product Managers need strong financial literacy:
– Ability to find, read, and interpret Income Statements,
Balance Sheets, Cash Flow, and public filings (10-K, 10-Q,
Proxy Statements, etc.)
• Executives, Boards, & Investors see things through
numbers first, technology & strategy second
• You have to pitch acquisitions in the language they
understand
• Check out: Product Management Financial Literacy
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7. Enterprise Value
• Total cost to acquire a • Market cap is only one
company at its current component of a
market value company’s value
• Formula • For private companies
– Market Cap (or equity you can estimate equity
value) value by looking at
– Minus Cash public company comps
– Plus Debt • Resources
– Plus Minority Interest / – How to calculate Enterprise
Liquidation Preferences Value
– How to calculate Enterprise
Value of private companies
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9. Accretion / Dilution
• Accretion = the degree • Accretion is determined
to which a specific by comparing the pro
acquisition either forma P&L of the
increases or decreases combined company
the profitability of the with the company’s
combined company existing metrics
• Accretion/dilution can • Execs, boards, &
impact gross margins, investors like
operating profit acquisitions that are
margins, EBITDA ‘immediately accretive’
margins or EPS
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10. Valuation Metrics
• Used as common • Commonly referred to
metrics to compare the as valuation multiples
relative valuation of a • Usually refer to trailing
company to its peers twelve months (ttm)
• Two most common numbers
metrics:
– Enterprise
Value/Revenue
– Enterprise Value /
EBITDA
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12. Acquisition Currency
• How to pay for an acquisition
• Typical sources: Cash, Debt, & Equity
• Debt markets are constrained now
– In 2007, you could borrow 4x to 8x PF
restructured EBITDA
– In 2010 2x – 3x is max and still hard to find
• Typical deals are a mix of cash and stock
• Check out: JDA & i2. The New Normal for Tech
Deals
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13. Acquisition Analysis Process
• Gather market, financial, and competitive info
Research • SEC, Industry Analysts, Press, etc.
• Analyze market position, share, trends, financial
performance, technology SWOTS, headcount, etc.
Analysis & Modeling • Develop operational concept
• Model PF NewCo Financials, Valuation Analysis, &
Returns Analysis
• Develop ‘Teaser’ Presentation
‘Teaser’ Presentation • Socialize internally with execs
• Deliver to board / investors
• Refine & update as new information is discovered
Update & Refinement during overall process
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14. Acquisition Teaser Presentation
• 20 to 30 slide presentation • Key Questions
that presents results of – How does this deal accelerate
analysis the achievement of our goals
& strategy?
• Executives, boards, &
– What are the tangible
investors don’t want to read financial & valuation benefits
300 page theses the deal provides?
• Want it in language they – What would the NewCo look
understand like?
– How much would it cost and
can it be financed?
– What are the risks &
mitigations?
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17. Summary Page
Company Overview /Recent Developments Stock Price Trends
• Founded 1979. Focused on ERP solutions for manufacturing
• NASDAQ: QADI
• HQ Santa Barbara CA. 1,500 heads. 625 Support, 350 R&D, 300
Sales & Marketing, 225 F&A
• Direct operations in 25 countries
• Highest rated challenger in Gartner MQ for Mid-Market/Tier 2 ERP
• 6,000 active customers
• Pamela Lopker, President and Chairman of the Board, Karl Lopker,
CEO, Daniel Lender, CFO
• Consistent challenges in executing revenue/profitability growth
initiatives
Financial Performance PF NewCo
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18. Investment Thesis
• Build best-in-class, global, manufacturing ERP provider
• Extend QADI portfolio with MyCo chemical and process
manufacturing offerings. >$100M cross sell opportunity <3
years
• Take QADI private, restructure to acceptable levels of
profitability, drive organic growth
– Drive QADI to from 3% to 25% EBITDA margins
• Exit to strategic acquirer in 3 to 5 years
• Consolidate MyCo infrastructure into existing QADI operations
• Generate $230M to $460M in incremental valution
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