PE/Strategic Buyer Memo Creation

Target: TechCorp Software Solutions Deal Size: $150M Enterprise Value

Executive Summary

• Recommendation: PROCEED - Strong strategic fit with 25% IRR base case
• Investment Thesis: Market-leading SaaS platform in growing vertical with clear acquisition synergies
• Key Metrics: 3.2x revenue multiple, 15x EBITDA, 18-month payback period

Progress:

• Executive Summary - Investment recommendation with key metrics
• Strategic Rationale - Synergies identification and quantification
• Financial Analysis - Three-scenario modeling with returns
• Market Assessment - TAM/SAM analysis and competitive landscape
• Due Diligence Summary - Key findings from workstreams
• Risk Framework - Identified risks with mitigation strategies
• Transaction Structure - Deal mechanics and financing approach
• Exit Strategy - Liquidity options and timeline
• Investment Committee Recommendation - Final decision framework

Step-by-Step Process

1. Gather Base Materials

   • Management presentation
   • Financial model and projections
   • Due diligence reports (financial, commercial, legal, IT)
   • Market research and benchmarking data

2. Structure Analysis

   • Build three-scenario financial model (Base/Upside/Downside)
   • Calculate returns: IRR, MOIC, payback period, NPV
   • Quantify synergies by category and timeline

3. Risk Assessment

   • Categorize risks: execution, market, financial, regulatory
   • Assign probability and impact ratings
   • Develop specific mitigation strategies

4. Investment Committee Packaging

   • Lead with recommendation and supporting rationale
   • Present probability-weighted returns
   • Include sensitivity analysis on key assumptions

Example 1: SaaS Platform Acquisition

Input: Manufacturing software company, $50M revenue, 25% EBITDA margins

Output:

EXECUTIVE SUMMARY
Recommendation: PROCEED with acquisition of ManufacturingTech at $200M EV

Strategic Rationale:
• Extends platform into $2B manufacturing software TAM
• Cross-selling opportunity to 500+ existing enterprise clients
• Proven management team with 15% organic growth track record

Financial Returns (Probability-weighted):
• Base Case (60%): 22% IRR, 2.8x MOIC
• Upside Case (25%): 35% IRR, 4.2x MOIC  
• Downside Case (15%): 12% IRR, 1.8x MOIC
• Blended: 23% IRR, 2.9x MOIC

Key Risks & Mitigants:
• Customer concentration (Top 3 = 40% revenue) → Diversification plan
• Integration complexity → Dedicated PMO with 18-month timeline
• Regulatory changes → Legal review confirms low probability

Example 2: Industrial Services Rollup

Input: Regional HVAC services, $25M revenue, fragmented market

Output:

STRATEGIC RATIONALE & SYNERGIES
Revenue Synergies ($8M annual by Year 3):
• Cross-selling commercial services to residential base: $3M
• Geographic expansion using combined infrastructure: $5M

Cost Synergies ($12M annual by Year 2):
• Corporate overhead consolidation: $4M
• Purchasing scale on equipment/materials: $3M  
• Route optimization and fleet reduction: $2M
• Technology platform unification: $3M

Market Position:
• Creates #2 player in metro market (12% share)
• Defensible local network with 24/7 service capability
• Recurring maintenance contracts provide stable cash flow

Financial Modeling

• Use conservative assumptions in base case
• Stress-test key value drivers (revenue growth, margins, multiples)
• Include detailed working capital and capex forecasts
• Model synergies with realistic timing and probability of achievement

Risk Assessment Framework

• Quantify impact in dollar terms where possible
• Assign probability percentages to major risks
• Focus on controllable vs. uncontrollable factors
• Link mitigation strategies to integration timeline

Investment Committee Presentation

• Lead with clear recommendation and rationale
• Use probability-weighted returns for decision-making
• Include bridge analysis showing value creation sources
• Provide sensitivity tables for key assumptions

Synergies Quantification

• Separate revenue and cost synergies with different timelines
• Include implementation costs and integration risks
• Use benchmarking data from comparable transactions
• Build bottom-up models for major synergy categories

Over-optimistic Projections

• Don't assume perfect execution of management plan
• Include integration delays and execution risks in base case
• Validate synergies against industry benchmarks

Inadequate Risk Assessment

• Avoid generic risk factors without specific mitigation
• Don't underestimate integration complexity and costs
• Include regulatory and competitive response scenarios

Poor Scenario Construction

• Base case should be most likely outcome, not conservative
• Ensure scenarios reflect genuine probability distribution
• Don't make upside case unrealistically optimistic

Weak Strategic Rationale

• Avoid vague synergy claims without quantification
• Don't ignore competitive dynamics post-acquisition
• Ensure strategic logic aligns with portfolio strategy

Transaction Structure Oversights

• Consider tax implications of deal structure
• Include contingency planning for financing market changes
• Don't overlook regulatory approval requirements and timing