Acquisition–Turns Loss Into Success and Corrects Financial Analysis

PROBLEM: Acquisition in India. Management considered a variety of factors via the traditional means of analysis and discussion. A financial analysis confirmed that the acquisition in India would be good.

As a quick check, they then applied the software, just to be sure. The software issued a huge suprise warning of 40%. It also warned them of possible biases, that they were overeager to grow quickly and that was possibly distorting their thinking and erroneously inflating the value of the acquisition.

BREAKTHROUGH: The software helped them see that the Indian acquisition as incorrect.There would be too many problems with the government and the labor situation. Instead, with the software they were able to develop a superior concept, that they should have acquired the US subsidiary only. This would cut the risk substantially and yielded significant profits, a demonstrably better opportunity. That was the breakthrough.

The first financial analysis that confirmed the value of the Indian acquisition was overly optimistic due to their bias in favor of a big acquisition to help them quickly grow large. Acquiring only the US subsidiary was validated financially but with data deemed more accurate and more objective due to the the software analysis.

ESTIMATED VALUE: millions of dollars