Business Case Forecasting
Laser focus on quality
Financial forecasts, where the investment thesis comes to life, can, at times, be the most controversial and angst-ridden part of the deal process. Done right, it can lay forth a road map to an accretive deal with a return in excess of the company’s cost of capital. Done wrong, it can end with flawed business decisions, business disruption, lost valueand finger pointing. It is where the strategy, commercial outlook, risk and uncertainty, investment requirements, competitive implicationsand synergies are synthesized into a point of view on the attractiveness of the deal. Given everything that comes into play with financial forecasts, deal teams should strive to generate useful insights rather than attempt to divine perfectly precise numbers (which are consistently wrong).
Forty-one percent of survey respondents report that the primary responsibility for developing the M&A business case forecast resides with their Corporate Development team, followed by business unit management and finance at 21% and 14%, respectively. This puts the onus on the Corporate Development team to have a comprehensive understanding of the technical aspects of putting together a quality forecast and orchestrating the many players.
Forecast accuracy vs. forecast quality
Companies put a lot of effort into forecasting the impact of a deal, but few feel highly confident about the accuracy of their forecasts. Only 25% of survey respondents report that they have a high degree of confidence in the accuracy of their M&A business case forecasts. The vast majority of survey respondents (75%) believe there is room for improvement.
For information about the Corporate Development survey report, please contact Chris Ruggeri, M&A services leader, Deloitte Financial Advisory Services LLP.
M&A business case forecasts: Managing uncertainty and maximizing deal value
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