Frameworks

M&A/Investment Framework

• Market (target)

  • Market size & growth

  • Competitors & market share

  • Customer segments

• Target Economics & Valuation

  • Profitability

    • Revenue drivers (price, volume, mix)

    • Cost structure (fixed v variable)

  • Valuation methods 

    • DCF/growing perpetuity

    • Multiples

    • MOIC

  • Investment economics

    • ROI 

    • Time to get return on invested capital

• Synergies & risks

  • Revenue synergies (pricing - e.g., larger or stronger brand, cross selling, channels)

  • Cost synergies (suppliers, eliminating duplicate headcount, tech & systems)

  • Competitive response

  • Regulatory/legal

  • Any assumptions

  • Exit

• 
  

Market Entry/Sizing Framework

• Market Attractiveness

  • Market size

  • Market growth & trends

  • Customer Segments & needs

  • Competitive landscape (fragmented vs concentrated) & share

  • Expected penetration rate

• Profitability & Entry economics

  • Revenue model: price, volume, mix

  • Cost structure: fixed vs variable costs. One time investments

  • ROI, break even, opporunity cost

• Entry feasibility & risks

  • Entry approach: capital, speed, profitability tradeoffs

    • Build

    • Buy 

    • Joint venture

  • Capability

    • Operations, distribution, tech

    • Risk: lack of skill, 

  • Regulations: tariffs, barriers from government, competitive advantages from government

  • Country/global Economics

Profitability Framework

• Revenue Performance

  • Price: 

  • Volume: industry specific units sold, channels

  • Mix (products, low vs high margin, premium vs mass market)

  • Revenue growth levers:

    • Price: Upselling, discounting, use customer data

    • Volume: loyalty, new markets

    • Mix: Cross selling, bundling, new products,

• Cost Structure

  • Variable cost: industry specific

  • Fixed costs: industry specific

  • Competitive benchmarks

  • Cost reduction levers: 

    • Fixed: Automation/Process Improvement, Scale, Divestiture business units

    • Variable: Supplier Negotiation, Discontinue costly items, Layoffs/reduce hours/early retirement/offshoring

• External forces

  • Market dynamics: size, growth, share

  • Customer: segments & needs, switching

  • Competitive forces: new entrants, existing players, 

Revenue Growth

• Existing Economics & Organic Growth 

  • Price: increase/decrease, discount 

  • Volume:  

    • Existing customers: increase retention, increase penetration

    • New customers: penetration, channels, marketing 

  • Product mix: 

    • Bundling 

    • New product development 

    • Prioritizing high margin products 

• Inorganic growth 

  • Buy:  

    • Competitor 

    • Supplier (vertical integration) or complementor

  • Partnership 

    • Joint venture 

  • Economics & feasibility  

• Market 

  • Size & growth 

  • Customer segments & preferences 

  • Competition & share 

Cost Reduction

• Cost structure (current) 

  • Variable costs: labor, materials, etc 

  • Fixed costs: SG&A, PPE, IT 

  • Benchmarks compared to competitors  

• Cost reduction levers 

  • Variable cost levers 

    • Labor: Layoffs/Encourage early retirement, Cut hours/overtime, Outsourcing / offshoring, cut benefits

    • Supplier renegotiation 

    • Process efficiency / productivity 

  • Fixed cost levers 

    • Consolidate facilities, departments, Encourage remote work

    • Automation/tech investment

• Feasibility, economics, & risks 

  • Economics 

    • Upfront vs recurring savings 

    • Payback/breakeven 

  • Feasibility 

    • Capability & change management 

  • Risks 

    • Brand

    • Customer experience, product quality 

    • Employee morale 

    • Reduced flexibility to meet future demand 

Brainstorm

• Financial/Non-Financial;

• Internal/External

• Opportunities/Risks

• Quantitative/Qualitative

• Short term/Long term

• Pros/Cons

• Growth: Build, Buy, or Joint Venture

What risks should I consider?

Operational 

• Lack of experience/Training required 

• Capacity constraints 

• Buy-in / change management risk 

• Channels

Tech 

• Reliability 

• Integration challenges 

• Privacy/Cybersecurity 

Market / Competitive 

• Assumptions about market adoption 

• Time to market (too slow)

• Substitution risk 

• Competitive response 

• Switching costs / switching behavior 

• Customer churn 

Financial 

• Assumptions risk 

• Cannibalization 

• Opportunity costs 

Legal 

• Labor unions 

• Regulations 

• Tariffs 

• Intellectual property

What are some things you can think of if you’re stuck?

Put yourself in shoes of (CCCPR):

• Customer 

  • Service/experience

• Competitor 

• Channels

  • Omnichannel

  • Online

• Lawyer (legal risks / regulations / legal fees) 

• CTO (tech feasibility, integration, data/privacy) 

• CMO (branding, customer acquisition, messaging) 

• Chief of Sales/BD (sales team, upselling, crossselling, incentives)

• Think about product, brand, competitive advantange

Brainstorm ways to improve revenue

Price 

• Raise price 

• Lower price 

• Discounting strategy 

• Bundling 

• Free trials, sign up bonuses

Volume 

• Marketing & using customer data

• New channels (e-commerce, omnichannel, retail/brick & mortar)

• New markets / geographies 

• Reduce churn (loyalty programs, switching costs)

Product mix 

• Prioritize higher revenue / higher margin products 

• Discontinue lower revenue / low margin products 

• Create new higher-value offerings 

Brainstorm ways to reduce cost

Main levers 

• Reduce headcount 

• Outsource functions 

• Automation / utilize tech 

• Merge systems 

• Revamp inefficient processes 

Cost types to sanity check 

• Upfront / fixed costs 

• Variable costs 

• Opportunity costs 

Why do you think revenue has declined?

Price-related 

• Lower willingness-to-pay (WTP) 

• Shift toward lower-priced items in our product mix 

Volume-related 

• Customers moved to competitors 

• Customers moved to substitutes 

• Reduction of complements (things that drive demand for our product) 

External / environment 

• Regulations 

Name industries

• Banking/Financial Services/Private Equity

• CPG

• Retail

• Grocery

• Tech

• Healthcare (Providers, Payers, Pharma)

• Airlines

• Media & Entertainment

• Oil & Gas

• Industrials

• Nonprofit