M&A Simulation

Target Company Overview

Enterprise Value Range

$180-240M

Revenue (LTM)

$32.5M

Revenue Growth

+45% YoY

EBITDA Margin

18%

Target Company & Market Materials

Review all materials before beginning your analysis

Your Role

You are an M&A Associate at TechVentures Partners, a $12B revenue enterprise software company. The corporate development team is evaluating DataSync Technologies for acquisition to enhance your data integration capabilities and cross-sell to your existing customer base.

Your Mission: Complete valuation analysis using comparable companies and precedent transactions, identify synergies, calculate pro forma returns, and make an investment recommendation with price range.

What You Need to Extract from Materials:

Target financials and growth metrics

Comparable company multiples

Precedent transaction multiples

Revenue and cost synergies

Valuation methodology and range

Strategic rationale and risks

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Target Company & Transaction Materials

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DataSync Technologies - Company Overview

DataSync Technologies is a cloud-based data integration platform that helps enterprises connect, transform, and synchronize data across multiple systems (CRM, ERP, databases, cloud apps). Founded in 2018, the company has grown rapidly by serving mid-market and enterprise customers in financial services, healthcare, and retail verticals.

Product: iPaaS (Integration Platform as a Service) - enables no-code/low-code data integration workflows

Business Model: SaaS subscription, annual contracts, usage-based pricing for data volume processed

Customers: 485 active customers, 95% retention rate, NRR (Net Revenue Retention) 130%

Financial Performance (Last Twelve Months - LTM)

Metric	LTM	Prior Year	Growth
Revenue	$32.5M	$22.4M	+45%
Recurring Revenue (ARR)	$35.2M	$24.1M	+46%
Gross Profit	$25.4M	$17.0M	+49%
Gross Margin	78%	76%	+2 pts
EBITDA	$5.9M	$2.7M	+119%
EBITDA Margin	18%	12%	+6 pts

Revenue Composition

Subscription Revenue: $30.2M (93% of total) - Annual contracts, monthly billing
Professional Services: $2.3M (7%) - Implementation, custom integrations
Net Revenue Retention: 130% (existing customers expanding usage)
Customer Acquisition Cost (CAC): $18,500 per customer
Lifetime Value (LTV): $142,000 (LTV/CAC ratio of 7.7x)

Customer Segmentation

Segment	# Customers	Avg Contract Value	% of Revenue
Enterprise (>$250K ACV)	42	$385K	50%
Mid-Market ($50-250K ACV)	158	$95K	46%
SMB (<$50K ACV)	285	$12K	4%

Comparable Public Companies

Company	Revenue	Rev Growth	EBITDA Margin	EV/Revenue	EV/EBITDA
MuleSoft (acq'd by Salesforce)	$296M	+58%	-2%	17.2x	N/A
Informatica	$1,420M	+12%	32%	7.8x	24.4x
Boomi (Dell owned)	~$250M	+35%	~15%	9.0x	60.0x
Talend	$318M	+18%	8%	5.2x	65.0x
Celigo	~$50M	+40%	20%	10.5x	52.5x
Median	--	+35%	15%	9.0x	52.5x

                        Comp Analysis Note: DataSync's 45% revenue growth is above median (+35%). EBITDA margin of 18% is close to median (15%). Size ($32.5M revenue) is smaller than comps, typically warrants 10-20% valuation discount.
                    

Precedent M&A Transactions (Data Integration/iPaaS)

Target	Acquirer	Year	Revenue	Rev Growth	EV/Revenue
MuleSoft	Salesforce	2018	$296M	+58%	17.2x
Jitterbit	Vista Equity	2021	~$60M	+35%	11.2x
SnapLogic	CapitalG	2021	~$100M	+40%	9.5x
Workato	Secondary (Battery Ventures)	2022	~$140M	+60%	12.8x
Celigo	Salesforce Ventures	2023	~$50M	+40%	10.5x
Median	--	--	--	+40%	11.2x

                        Transaction Multiples Note: Median precedent EV/Revenue is 11.2x. DataSync's 45% growth is above median (+40%), suggesting it could command premium. MuleSoft's 17.2x was outlier (strategic premium from Salesforce).
                    

TechVentures Partners - Acquirer Profile

TechVentures Partners is a $12B revenue enterprise software company offering CRM, ERP, and business intelligence solutions to mid-market and enterprise customers. Key stats:

Revenue: $12.2B (FY2024), +8% growth
EBITDA Margin: 28%
Customer Base: 18,500 active customers, 92% retention
Sales Force: 2,400 enterprise sales reps, existing relationships with Fortune 1000
M&A Track Record: 12 acquisitions in last 5 years, average 3.2x revenue multiple paid

Identified Synergies - Revenue Side

1. Cross-Sell to Existing Customer Base (Year 3 Run-Rate)

TechVentures has 18,500 customers, 65% of which need data integration solutions
Assume 8% conversion rate = 962 new DataSync customers by Year 3
Average contract value: $75,000 (mid-market tier)
Revenue Synergy: $72.2M annual run-rate by Year 3

2. Up-Sell DataSync to Larger Enterprises (Year 3 Run-Rate)

TechVentures can leverage relationships to move DataSync up-market
Convert 25 mid-market customers → enterprise tier (increase ACV from $95K to $250K)
Revenue Synergy: $3.9M incremental annual revenue

Total Revenue Synergies: $76.1M by Year 3 (run-rate)

Identified Synergies - Cost Side

1. Sales & Marketing Elimination

DataSync spends ~$12M annually on S&M (37% of revenue)
TechVentures can cross-sell through existing sales force, eliminate 70% of DataSync S&M
Cost Synergy: $8.4M annually

2. G&A and Infrastructure Consolidation

Eliminate redundant finance, HR, legal functions ($1.8M savings)
Consolidate cloud infrastructure and vendor contracts ($600K savings)
Cost Synergy: $2.4M annually

Total Cost Synergies: $10.8M annually

                        Synergy Summary: Total synergies = $76.1M revenue + $10.8M cost = $86.9M by Year 3. At 18% EBITDA margin on incremental revenue, total EBITDA impact = $24.5M ($13.7M from revenue synergies + $10.8M from cost synergies).
                    

Strategic Rationale

Why This Deal Makes Sense:

Strategic Fit: Data integration is critical missing capability in TechVentures' product suite
Customer Overlap: 78% of DataSync customers also use competitor CRM/ERP systems - opportunity to convert to TechVentures
Market Timing: iPaaS market growing 35% annually, $8.5B TAM by 2027
Talent Acquisition: DataSync's 85-person engineering team brings deep integration expertise
Cross-Sell Potential: Massive opportunity to leverage 2,400 TechVentures sales reps

Key Risks

Integration Complexity: Merging product roadmaps, potential customer confusion
Customer Concentration: Top 10 customers = 38% of DataSync revenue
Competitive Response: Salesforce, Microsoft could bundle competitive offerings
Retention Risk: Key DataSync executives and engineering talent may leave post-acquisition
Synergy Execution: Cross-sell assumes 8% conversion - unproven, could be lower

Seller Expectations & Process

DataSync's board has engaged an investment bank to run a formal auction process. Key details:

Valuation Expectations: Seller wants 12-14x revenue ($390-455M enterprise value)
Competing Bids: 3 strategic buyers + 2 private equity firms in process
Timeline: Final bids due in 3 weeks, looking to close in 60 days
Management Retention: CEO and CTO want significant equity rollover (10-15%)

Comparable Companies Analysis

Calculate valuation using public company multiples

Comparable Companies Method

This approach values DataSync based on how similar public companies trade in the market. The key steps are:

1. Identify comparable companies (data integration/iPaaS vendors)
2. Calculate their trading multiples (EV/Revenue, EV/EBITDA)
3. Apply median multiples to DataSync's financials
4. Adjust for size/growth differences (typically 10-20% discount for smaller companies)

Valuation Calculation Examples:

EV = $32.5M revenue × 9.0x median EV/Revenue = $292.5M. Apply 15% size discount = $248.6M enterprise value

The company is worth around $250M because it's a good SaaS business

1. What is the median EV/Revenue multiple from comparable companies?

2. Calculate implied enterprise value using median EV/Revenue

Formula: Enterprise Value = Revenue (LTM) × EV/Revenue Multiple
DataSync Revenue (LTM) = $32.5M
Median EV/Revenue = [your answer from Q1]
Calculate: $32.5M × _____ = ?

3. Apply a size discount. What discount percentage is appropriate?

4. Calculate final comparable companies valuation (after discount)

Implied EV (Q2) × (1 - Discount%) = Final Valuation

5. What is the median EV/EBITDA multiple from comparables?

6. Explain why EV/EBITDA multiples are so high for these companies (80+ words)

Precedent Transactions Analysis

Calculate valuation using M&A transaction multiples

Precedent Transactions Method

This approach values DataSync based on actual M&A transactions of similar companies. Transaction multiples typically include a "control premium" (10-30% higher than public trading multiples) because buyers pay extra to acquire 100% ownership.

1. What is the median EV/Revenue multiple from precedent transactions?

2. Calculate implied enterprise value using precedent transactions

Formula: EV = $32.5M revenue × Precedent EV/Revenue Multiple

3. How does the precedent transactions valuation compare to comps valuation? (100+ words)

4. Which precedent transaction is MOST comparable to DataSync and why? (80+ words)

Synergy Analysis & Expected Returns

Calculate synergy value and evaluate investment returns

1. What are the total identified revenue synergies by Year 3? (from materials)

2. What are the total identified cost synergies annually? (from materials)

3. Calculate total EBITDA impact from synergies by Year 3

Revenue Synergies EBITDA: $76.1M × 18% margin = $13.7M
Cost Synergies EBITDA: $10.8M (100% flows to EBITDA)
Total EBITDA Synergies: ?

4. Calculate DataSync's pro forma Year 3 EBITDA (standalone + synergies)

Assume DataSync grows standalone EBITDA from $5.9M (LTM) to $12.5M by Year 3 (organic growth)
Pro Forma EBITDA = Standalone + Synergies

5. Are the identified synergies realistic and achievable? What are the key risks? (150+ words)

6. If you pay $240M for DataSync, what is the implied EV/EBITDA multiple on Year 3 pro forma EBITDA?

Formula: Purchase Price / Year 3 Pro Forma EBITDA = Multiple

Investment Recommendation

Develop your recommendation and price range

Strong vs. Weak Recommendations:

Recommend acquisition at $210-240M (6.5-7.4x revenue). Comps valuation of $249M provides ceiling. Precedent transactions support 11.2x, but we apply 30% discount for execution risk. Strong strategic fit, $24.5M EBITDA synergies justify 8.5x pro forma multiple.

Buy DataSync because it's a good company and we need data integration.

1. What is your recommendation?

2. If proceeding, what is your recommended offer price range?

Consider: Comps valuation, precedent transactions, synergy value, seller expectations ($390-455M), competitive bids

3. Provide detailed rationale for your recommendation (250+ words)

4. What are the top 3 risks that could derail this acquisition? (120+ words)

5. How would you structure the deal to mitigate risks?

Earnout (tie 20-30% of price to hitting revenue/retention targets)

Management retention packages (equity vesting over 3-4 years)

Escrow holdback (10-15% in escrow for 12-18 months for indemnification)

Staged payments (defer portion of consideration to Year 2-3)

6. What is your "walk-away" price? (maximum you'd pay)

M&A Analysis Results

Your comprehensive investment analysis scorecard

Overall Score

--

Out of 100 Points

Comparable Companies Analysis --/25

Precedent Transactions Analysis --/15

Synergy Analysis & Returns --/25

Investment Recommendation --/35

Your Progress

DataSync Technologies