Volume 5 —The Land Mines Strewn Throughout the Data Room
M&A transactions, like most transactions in life, involve a cost/benefit analysis. Some cost/benefit analyses are relatively easy to perform. For example, if I buy an energy efficient appliance, I can calculate the likely savings in energy costs over the useful life of the appliance (the benefit) and compare it with the acquisition cost of the appliance (the cost). M&A transactions, of course, involve far more complex cost/benefit analyses. But the key to any such analysis is the ability to identify and quantify the costs and benefits with some measure of confidence. Every line of business has its own quirks and idiosyncrasies, and they need to be understood when evaluating the acquisition of a company that operates in that line. More than most, the business of government contracting is replete with such quirks and idiosyncrasies, and they can have a dramatic effect on the “cost” side of the cost/benefit analysis.