Investment, Merger & Acquisition Workbook

A family office with written sector theses knows which companies it wants before they are for sale, meets founders early and pays a fair price without an auction.

• Research cycle: map → decide → target → engage → convert → review, once a year.
• A thesis states why this sector, why now, why us, how we make money — and kill criteria written before the first deal.
• Rate conviction 1–5: only 4–5 get origination time and advisor spend; 3 stays on watch; 2 is retired.
• Research notes are one page at most, sourced and dated; every deal links back to its thesis.

See many opportunities, kill most of them quickly and cheaply, and bring the few that fit to the principal with a clear reason to proceed.

• Best deal flow is proprietary: map target sectors and approach founders without successors directly.
• Score every teaser out of 100 on sector, ticket size, geography, margin and leverage. 80+ proceeds to NDA.
• Stop or ask before an NDA if adjustments exceed 15% of EBITDA, one customer is above 30% of revenue, or licences and land are unclear.
• The IM must answer ten questions, from customer concentration to why the owner is selling.

Valuation is a range with reasons. Build an honest picture of sustainable earnings, value it three ways, and turn it into three prices.

• Rebuild EBITDA line by line; only truly one-off, evidenced items belong in normalised EBITDA.
• Cash conversion (operating cash flow ÷ EBITDA) should be 70–90% for service and logistics businesses.
• Define net debt and a working-capital peg in the LOI — everything between EV and the cheque.
• Triangulate DCF, trading comps and precedent deals across bear, base and bull scenarios; be wary when terminal value exceeds 75% of EV.

DD is not a hunt for everything that is wrong. Every finding must lead to a decision, and every decision must be visible to the IC.

• Turn the thesis into 10–20 key questions, each with a workstream and an owner.
• Eleven workstreams, from financial, tax and legal to licensing, HR, IT & cyber and ESG.
• Hold a red-flag call at weeks 3–4 and stop early if a deal-breaker appears.
• Accepted findings scoring 8 or more carry into the portfolio risk register at closing.

A good IC meeting is short because the memo did the work. The recommendation, price range and walk-away appear in the first paragraph.

• Nine-section memo, sent with a named model version at least 3 working days ahead; it must name the thesis it serves.
• Weighted score across strategic fit, financial quality, valuation, market, management and execution.
• Every deal is tested pro forma against the Investment Policy limits before the vote.
• At closing the deal hands over automatically: a holding in 08, its risks in 09, its 100-day plan in 05.

After approval the deal becomes a project with a critical path: the SPA, conditions precedent, regulatory steps and the money.

• Choose share or asset purchase deliberately — licences, staff, tax and historical risk differ.
• Negotiate price mechanism (completion accounts or locked box), warranties, indemnities, caps and long-stop date.
• About four months from LOI to closing is achievable for a clean private deal.
• Illustrative funds flow: 10% deposit, 70% at closing, 10% escrow, 10% earn-out.

The deal is paid for on closing day; the value is earned in the next two years. Integration fails most often for human reasons.

• Pick an approach in the IC memo: Preserve, Optimise or Absorb.
• Steering committee monthly, an integration office weekly, one named owner per workstream.
• Day-1 rule: nothing changes for customers except what you announce on purpose.
• KPIs and covenants feed the early-warning triggers on the watch list.

A deal ends at closing; an investment ends at exit. Every quarter the family needs to know how much capital is in each company, what it is worth today, and what it is earning.

• Every holding sits in a vehicle — holding company, deal SPV, co-investment SPV or fund — with a commitment, hurdle and carry.
• Four ledger entries explain every rupiah: capital call, investment, distribution and fee.
• Holdings stay at cost until a first approved fair-value mark; marks are prepared by one person and approved by another.
• An annual hold-or-sell review for every holding: “hold” is a decision with a date.

Governance decides who may decide what, how much risk the family will carry, and how honestly results are measured — and makes those rules executable.

• Five Investment Policy limits measured continuously, with a warning at 90% of a maximum.
• One risk register for the firm, every holding and every live deal, with a heat map.
• A five-rung watch-list ladder from Normal to Restructuring, driven by KPI and covenant triggers.
• A delegation-of-authority matrix with four-eyes rules, and a five-week quarterly valuation cycle.