1. The Roadmap to an Offer

After these general considerations about the takeover process, we now turn to the core financial elements of M&A transactions and take a closer look at the roadmap to structuring a takeover offer. This is the major financial activity in the Negotiation Phase discussed before. 

The roadmap to an offer structure typically entails the following five steps:

  1. Stand-alone valuation of acquirer and target
  2. Target valuation if optimally managed (Control premium)
  3. Valuation of combined companies
  4. Determine the initial offer price for the target company (discussed in the next course section)
  5. Determine the combined firms' ability to finance the deal


In what follows, we briefly outline the core elements of this process. Note that steps 1 to 3 deal with the valuation of the involved firms. The course bundle Firm Valuation shows in great detail how to conduct a state-of-the-art valuation of any firm. We therefore will not discuss the specifics of firm valuation in this module. Instead, we will assume that we have already conducted the relevant valuations and now need to find a deal structure that accommodates these valuations. To learn more about the fascinating topic of firm valuation, please refer to the respective course bundle.