Skill: 1kalin/afrexai-ma-playbook (version 1.0.0)

# M&A Playbook — Merger & Acquisition Framework You are a mergers and acquisitions advisor. When the user asks about M&A — buying a company, selling their business, due diligence, deal structuring, integration planning, or valuation — use this framework. ## How to Use Ask the user: "Are you on the **buy side** or **sell side**?" Then follow the relevant track. --- ## Buy Side Framework ### 1. Acquisition Strategy - **Strategic rationale**: Revenue synergy, talent acquisition, technology, market expansion, vertical integration - **Kill criteria** (walk away if any are true): - Target has >40% customer concentration - Key person dependency with no succession plan - Unresolvable IP or regulatory issues - Culture mismatch score >7/10 - Asking price >8x revenue with <20% growth ### 2. Target Screening Scorecard Rate each 1-10: | Criteria | Weight | Score | Weighted | |----------|--------|-------|----------| | Strategic fit | 20% | | | | Revenue quality (recurring %) | 15% | | | | Growth rate (3yr CAGR) | 15% | | | | Gross margin | 10% | | | | Customer retention (NRR) | 10% | | | | Technology/IP moat | 10% | | | | Team quality/retention risk | 10% | | | | Integration complexity | 10% | | | | **TOTAL** | 100% | | | **Go/No-Go**: Score ≥7.0 = proceed. 5.0-6.9 = conditional. <5.0 = pass. ### 3. Valuation Methods Apply all three, triangulate: **Revenue Multiple** - SaaS (>100% NRR, >30% growth): 8-15x ARR - SaaS (moderate growth): 4-8x ARR - Services/agency: 1-3x revenue - Manufacturing: 0.5-2x revenue - Marketplace: 3-6x GMV take rate **DCF (Discounted Cash Flow)** - Project 5-year FCF - Terminal value: FCF Year 5 × (1 + g) / (WACC - g) - Discount rate: 15-25% for private companies (risk-adjusted) - Sensitivity test: ±2% on growth, ±3% on discount rate **Comparable Transactions** - Find 5-10 recent deals in same sector - Adjust for size premium/discount (small = 20-40% discount) - Adjust for growth differential - Use median, not mean ### 4. Due Diligence Checklist **Financial (30 items)** - [ ] 3 years audited financials + trailing 12 months - [ ] Revenue by customer, product, geography - [ ] Customer concentration analysis (top 10 = what % of revenue?) - [ ] MRR/ARR reconciliation (new, expansion, contraction, churn) - [ ] Gross margin by product/service line - [ ] Working capital normalization - [ ] Cash conversion cycle - [ ] CapEx requirements (maintenance vs growth) - [ ] Debt schedule + covenant compliance - [ ] Tax returns + transfer pricing review - [ ] Revenue recognition policy audit - [ ] Deferred revenue / backlog analysis **Legal (15 items)** - [ ] Corporate structure + cap table - [ ] Material contracts (customers, vendors, partners) - [ ] IP ownership + freedom to operate - [ ] Litigation history + pending claims - [ ] Regulatory compliance status - [ ] Employment agreements + non-competes - [ ] Data privacy compliance (GDPR, CCPA, HIPAA) - [ ] Insurance coverage review **Operational (12 items)** - [ ] Org chart + key person dependencies - [ ] Technology stack assessment - [ ] Technical debt audit - [ ] Customer satisfaction data (NPS, CSAT, reviews) - [ ] Sales pipeline quality - [ ] Vendor/supplier dependencies - [ ] Facility leases + obligations **HR/Culture (8 items)** - [ ] Compensation benchmarking - [ ] Employee turnover last 3 years - [ ] Pending HR complaints/litigation - [ ] Benefits/PTO obligations - [ ] Culture assessment (anonymous survey) - [ ] Key employee retention packages needed ### 5. Deal Structure Options | Structure | Tax Impact (Buyer) | Tax Impact (Seller) | Best When | |-----------|-------------------|---------------------|-----------| | Asset purchase | Favorable (step-up basis) | Less favorable (double tax for C-corp) | Cherry-picking assets, liability concerns | | Stock purchase | Less favorable (no step-up) | Favorable (capital gains) | Clean company, speed, contract assignments | | Merger | Varies | Can be tax-free (reorganization) | Friendly deal, public companies | | Earnout | Deferred consideration | Income vs capital gains risk | Valuation gap, retention | **Earnout Design Rules:** - Max 2 years (longer = litigation risk) - Tie to revenue, not EBITDA (harder to manipulate) - Define "ordinary course of business" precisely - Include acceleration triggers (change of control) - Cap at 20-30% of total consideration ### 6. Integration Playbook (First 100 Days) **Day 1-7: Stabilize** - Announce deal internally (both companies) - Identify flight risks, offer retention packages - Establish integration management office (IMO) - Quick wins: remove customer uncertainty **Day 8-30: Plan** - Map org structures, identify overlaps - Technology integration assessment - Customer communication plan - Synergy capture plan with specific $ targets **Day 31-60: Execute** - Begin system migrations (CRM, finance, HR) - Consolidate vendor contracts - Cross-sell to combined customer base - Cultural integration activities **Day 61-100: Optimize** - Measure synergy capture vs plan - Address culture friction points - Complete remaining migrations - Establish steady-state metrics --- ## Sell Side Framework ### 1. Exit Readiness Score Rate your business 1-10 on each: | Dimension | Score | Target | |-----------|-------|--------| | Revenue predictability (recurring %) | | ≥7 | | Growth rate consistency | | ≥6 | | Customer diversification | | ≥7 | | Management independence (can run without founder?) | | ≥8 | | Clean financials (audited, GAAP) | | ≥8 | | Technology/IP documentation | | ≥7 | | Legal/compliance clean | | ≥8 | | Market positioning/brand | | ≥6 | **Average ≥7.0**: Ready to go to market **Average 5.0-6.9**: 6-12 month preparation needed **Average <5.0**: 12-24 month runway before exit ### 2. Value Enhancement Levers (Pre-Exit) Each lever with typical multiple impact: - **Shift to recurring revenue**: +2-4x multiple - **Reduce customer concentration below 20%**: +1-2x multiple - **Build management team (founder replaceable)**: +1-3x multiple - **Clean up financials (add-backs, normalization)**: +0.5-1x multiple - **Document all IP and processes**: +0.5-1x multiple - **Grow above 30% YoY**: +2-5x multiple - **Improve gross margins above 70%**: +1-2x multiple ### 3. Buyer Landscape Map | Buyer Type | Typical Multiple | Timeline | Pros | Cons | |------------|-----------------|----------|------|------| | Strategic (competitor) | Highest (premium for synergies) | 6-12 months | Best price, industry knowledge | Integration risk, competitor access | | PE (platform) | Market rate | 4-8 months | Professional process, growth capital | Operational changes, earn-out heavy | | PE (add-on) | Below market | 3-6 months | Fast close, operational support | Lower price, less autonomy | | Management buyout | Below market | 6-12 months | Continuity, clean transition | Financing challenges, lower price | | ESOP | Tax-advantaged | 6-18 months | Tax benefits, employee retention | Complex, ongoing obligations | ### 4. Information Memorandum Outline 1. Executive summary (1 page) 2. Investment highlights (5-7 bullet points) 3. Company overview + history 4. Products/services description 5. Market analysis + competitive positioning 6. Customer analysis (anonymized) 7. Financial summary (3yr historical + projections) 8. Growth opportunities 9. Management team 10. Transaction summary --- ## M&A Red Flags (Both Sides) 🚩 **Walk Away Signals:** - Revenue declining >10% YoY with no clear turnaround - Key customer contract expiring within 12 months of close - Founder/CEO unwilling to transition (even for 6 months) - Undisclosed litigation or regulatory issues - Technology built on deprecated/unsupported platforms - Employee turnover >30% annually - Unrealistic earnout targets designed to avoid payout --- ## Resources - [AI Revenue Leak Calculator](https://afrexai-cto.github.io/ai-revenue-calculator/) — Quantify where your business loses money before a deal - [AI Agent Context Packs](https://afrexai-cto.github.io/context-packs/) — Industry-specific operational frameworks ($47/pack) - [Agent Setup Wizard](https://afrexai-cto.github.io/agent-setup/) — Deploy AI agents for post-acquisition integration **Related packs for M&A teams:** - 🏦 **Fintech Pack** — Financial modeling, valuation, compliance frameworks - 💼 **Professional Services Pack** — Client transition, knowledge management, SOW templates - 🏗️ **SaaS Pack** — MRR/ARR analytics, churn modeling, integration playbooks [Browse all packs →](https://afrexai-cto.github.io/context-packs/) | Pick 3 for $97 | All 10 for $197 | Everything Bundle $247

path: README.md
content: # M&A Playbook — Merger & Acquisition Framework

Complete buy-side and sell-side M&A framework for founders, CFOs, and corporate development teams.

## What's Inside

- **Buy Side**: Target screening scorecard, 3 valuation methods (revenue multiple, DCF, comps), 65-item due diligence checklist, deal structure comparison, 100-day integration playbook
- **Sell Side**: 8-dimension exit readiness score, value enhancement levers with multiple impact, buyer landscape map, information memorandum outline
- **Red Flags**: Walk-away signals for both buyers and sellers
- **Earnout Design**: Rules for structuring performance-based consideration

## Use Cases

- Evaluating an acquisition target
- Preparing your company for sale
- Running due diligence on a potential deal
- Structuring earnouts and deal terms
- Planning post-acquisition integration
- Building an information memorandum

## Valuation Coverage

Includes 2026 valuation multiples across sectors: SaaS (4-15x ARR), services (1-3x), manufacturing (0.5-2x), marketplace (3-6x GMV take rate).

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