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Medium Merger & Acquisition

Back It On Up

#Technology
ProHub Comment

This is a comprehensive M&A valuation case requiring candidates to build a DCF model, identify and quantify synergies, and develop acquisition strategy. The case progresses logically from standalone valuation to combined entity valuation with explicit revenue and cost synergies, testing both quantitative rigor and strategic thinking.

Estimated Time 26 minutes
Difficulty Medium
Source Darden
34 / 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? BackupCo produces physical backup appliances that site on site at client locations, as well as software that clients can deploy on their own devices. These products help protect data by duplicating emails, databases, sales data etc. to alternate locations. It only sells B2B.
  2. Does it sell its products worldwide? BackupCo does 100 Million dollars worth of business in North America and the remainder of its business in EMEA and APAC.
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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BackupCo evaluates acquiring CloudCo by performing a standalone DCF valuation ($60M), then calculating combined entity value including cross-sell revenue synergies and cost savings (SG&A, headcount, R&D) to reach $71.7M maximum acquisition price. The analysis incorporates a structured integration framework and risk mitigation strategy.

Key Insights:

  1. Standalone valuation ($60M) vs. combined value ($71.7M) illustrates the importance of synergy capture in M&A pricing
  2. Revenue synergies come from cross-selling opportunities across three customer tiers; cost synergies from eliminating duplicate functions
  3. Proper integration management structure and risk mitigation (customer retention, talent retention, synergy validation) are critical to deal success
  4. The framework emphasizes MECE analysis across valuation methods, revenue/cost synergies, and identified risks