M&A Deal Origination

Identifying an M&A deal that makes sense is not an easy or quick exercise, but here are a couple things you can do that will minimize your risk of looking stupid: - Read the equity research reports on the large companies in your sector. Often times the analysts will suggest specific acquisition targets, or at least sectors that they think a company should acquire - Find a target company that is: a) not too big to destroy the acquiror if poorly digested, and b) fast growing but at a reasonable valuation. If there's no growth-at-a-reasonable-price, find one that is cheap, even to the point of being mildly distressed, but is in that position due to a strategic problem that your client / the acquirer could solve - Run a short form accretion / dilution and synergies required to breakeven analysis to make sure the deal could be additive to the acquiror's earnings by year 3 - Make sure you can tell a good story as to why the combination makes strategic sense and why investors will likely approve of it - Finally, ask yourself this question: If the target company is a good company, why shouldn't the shareholders of your client/the acquiror just buy the target company's stock themselves?