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Medium Merger & Acquisition

Back It On Up

#Technology #Data Backup #Disaster Recovery

Practice this intermediate merger & acquisition case interview question from EY in the Technology sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This case focuses on M&A valuation, specifically calculating a standalone valuation and then enhancing it with revenue and cost synergies. The math is straightforward, but correctly identifying and applying the synergy percentages to the revenue increase is crucial for the final acquisition price.

Estimated Time 26 minutes
Difficulty Medium
Source Darden
24 / 100
BackupCo is a data backup and disaster recovery company. It’s primary headquarters is in Boston, its client services department is in South Carolina, and its development is split between Texas and Ukraine. To expand its product offerings, reach, and revenue, it is considering purchasing CloudCo, a cloud backup provider headquartered in Southern California. Our firm has been hired to evaluate this potential acquisition. How would you begin considering this deal?

Clarifying Information

  1. What does BackupCo Produce? / What is data backup and disaster recovery?
  2. Does it sell its products worldwide?
Mock Interview
Interviewer

BackupCo is a data backup and disaster recovery company. It’s primary headquarters is in Boston, its client services department is in South Carolina, and its development is split between Texas and Ukraine. To expand its product offerings, reach, and revenue, it is considering purchasing CloudCo, a cloud backup provider headquartered in Southern California. Our firm has been hired to evaluate this potential acquisition. How would you begin considering this deal?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

The case involves evaluating BackupCo’s potential acquisition of CloudCo. It requires performing a standalone valuation of CloudCo using a DCF approach and then calculating additional value from post-acquisition synergies to determine the maximum offer price.

Key Insights:

  1. M&A valuation typically starts with a standalone valuation (e.g., using DCF).
  2. Acquisition value can be increased by identifying and quantifying revenue and cost synergies.
  3. Synergies (both revenue and cost) must be clearly calculated and added to the standalone value to determine the maximum willingness to pay.
  4. Understanding the components of a DCF (Cash Flow, Discount Rate, Growth Rate) is fundamental for valuation.