LIBEY-CONCORDIA ACQUISITION PROTOCOL

LIBEY-CONCORDIA ACQUISITION PROTOCOL

A Checklist For CEOs During the Acquisition Evaluation Process

The Libey-Concordia Acquisition Protocol was developed to assist CEOs in evaluating acquisition
candidate companies prior to making a commitment of intent or other substantive commitment to the
acquisition process. While exhaustive, this protocol should be used in conjunction with expert legal
and financial advisory services and should not be used as a replacement or substitute for acquisition
counsel.

*****

PREFACE
The Libey-Concordia Acquisition Protocol is the outgrowth of years of
experience isolating, evaluating, and then determining the acquiring CEO's unique
passion for the acquisition candidate target. While most acquisition targets can appear
interesting, only a very few will actually "fit" the passion, culture, economics, and
vision of the acquiring CEO. Libey-Concordia approaches acquisition identification
for client CEOs from this subjective point of view first. If the subjective "fit" is
correct, the due diligence and financial exploration is, then, an appropriate next step in
the acquisition process.

Acquiring CEOs who complete the Libey-Concordia Acquisition Protocol, and

refer to it frequently as an evaluative assistance document, are more likely to achieve a
greater "acquisition comfort level" prior to making a substantive commitment.

The Libey-Concordia Acquisition Protocol has three major sections. Section I

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addresses the acquiring CEO's baseline position and expectations; Section II addresses
the acquisition candidate company's fit with those baseline positions and expectations;
Section III addresses initial evaluative points to determine the appropriateness of
moving to the due diligence and discovery phases of the acquisition process.
__________
SECTION I
1. List the ten primary strategic requirements for an
acquisition as they exist in your vision.

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

5. _____________________________________________

6. _____________________________________________

7. _____________________________________________

8. _____________________________________________

9. _____________________________________________

10. _____________________________________________

2. From the 10 primary strategic requirements for an

acquisition listed in question I.1, select the 4 top
requirements that you demand of an acquisition target
and rank them in order.

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1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

3. Given these four baseline strategic requirements that you

have for an acquisition target, which single requirement
are you willing to forego or compromise on to make an
acquisition possible?

1. _____________________________________________

4. How much money will you commit to an acquisition

before you become uncomfortable?

$ _________________________

5. What do you really want to buy?

________________________________________________

________________________________________________

________________________________________________

6. Where do you really want this acquisition located?

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________________________________________________

________________________________________________

7. How many days a month are you willing to commitment

to management dislocation to manage and grow an
acquisition?

________________________________________________

8. Do you really want the present owner to remain?

Yes _____ No ____

9. Do you really want the existing management to remain?

Yes ____ No ____

10. Do you expect the acquisition to be relocatable?

Yes ____ No ____

11. Do you want to buy bricks and mortar?

Yes ____ No ____

12. Do you want an acquisition with fully integrated
functions, or do you want an acquisition that is mostly
outsourced?

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________________________________________________

________________________________________________

13. How many employees are you comfortable with adding

through an acquisition?

________________________________________________

14. What is the minimum Return On Investment you will

accept for an acquisition investment?

_____________________ %

Over how many years?

_____________________ years

15. What is your present management inventory for a

successful acquisition?

Senior managers presently on-board and capable of

managing an acquisition:

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

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5. _____________________________________________

6. _____________________________________________

7. _____________________________________________

8. _____________________________________________

Senior managers not presently on-board; capacity for

managing an acquisition lacking:

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

5. _____________________________________________

6. _____________________________________________

7. _____________________________________________

8. _____________________________________________

16. Who is the lead manager presently on board for

managing the acquisition?

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________________________________________________

17. Who on the present staff has actually done acquisitions?

________________________________________________

18. Who are my outside experts for acquisition counsel and

consultation?

1. Acquisition Consultant

__________________________________________

2. Banking

__________________________________________

3. Law Firm

__________________________________________

4. Accounting Firm

__________________________________________

5. MIS/Technology Consultant

__________________________________________

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6. Compensation/HR Consultant

__________________________________________

7. Other Expertise

19. If I did not do this acquisition, what could I do with the

investment capital that would be potentially as beneficial
to the company's future?

________________________________________________

________________________________________________

________________________________________________

________________________________________________

________________________________________________

20. On a scale of 1 to 4, with 1 being "Not Ready" and 4

being "Totally Ready," how ready is my company to do
an acquisition?

(circle one) 1 2 3 4

21. On a scale of 1 to 4, with 1 being "Not Ready" and 4

being "Totally Ready," how ready am I to do an
acquisition?

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(circle one) 1 2 3 4

*****
SECTION II
1. Of the 10 primary strategic requirements listed in I.1,
compare and list by line item those that are present in
the target acquisition.

Requirement Present Not Present

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

5. _____________________________________________

6. _____________________________________________

7. _____________________________________________

8. _____________________________________________

9. _____________________________________________

10. _____________________________________________
2. Of the top 4 primary strategic requirements listed in I.2,
compare and list by line item those that are present in
the target acquisition.

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1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

3. Which single requirement will you more than likely

have to forego or compromise in order to make the
acquisition?

________________________________________________

4. What do you believe the sale price of this acquisition

will be?

$ ___________________

Is this a financial buyer price or a strategic buyer price?

Financial _____ Strategic ______

Is this price below, at, or above your level of comfort?

Below ____ At ____ Above ____

5. What are you buying with this acquisition target?

________________________________________________

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________________________________________________

________________________________________________

________________________________________________

Does this compare to what you want to buy?

Compares ____ Does Not Compare ____

6. Is this acquisition target located ideally?

Yes ____ No ____

If not, is it located in an acceptable area/region?

Yes ____ No ____

7. How much management dislocation will this acquisition

target require?

Days/Month _____

Is this acceptable and can you manage the dislocation?

Yes ____ No ____

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8. Will the present owner stay?

Yes ____ No ____

Is that good?

Yes ____ No ____

Realistically and honestly, how long do you believe the

two of you will continue in the acquisition management
relationship?

________________________________________________

9. Will the key present managers remain?

Yes ____ No ____

Is that good?

Yes ____ No ____

Realistically and honestly, how long do you believe each

of the key managers will continue in the acquisition
management relationship?

Title ___________________________ Time ________

Title ___________________________ Time ________

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Title ___________________________ Time ________

Title ___________________________ Time ________

Title ___________________________ Time ________

Title ___________________________ Time ________

Title ___________________________ Time ________

10. Is the acquisition target relocatable?

Yes ____ No ____

11. What percentage of the acquisition price is bricks and

mortar?

_________ % $ ________

12. Is this a full-function acquisition or a "virtual" or

outsourced acquisition target?

________________________________________________

13. How many employees will be necessary after the

acquisition?

________________________________________________

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14. Is the present net profitability, return on investment, and

other key investment indicators at your level of
expectation?

Yes ____ No ____

15. Given the inventory of capable managers listed in I.15

and the deficit listed in I.16, how do these compare to
the manager inventory requirements of the acquisition
target?

Managers that have the capacity:

________________________________________________

________________________________________________

________________________________________________

________________________________________________

________________________________________________

________________________________________________

Managers that will be needed:

________________________________________________

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________________________________________________

________________________________________________

________________________________________________

________________________________________________

________________________________________________

16. Will my present lead manager for acquisitions like this

acquisition; be able to do this acquisition; be capable of
integrating this acquisition?

Yes ____ No ____

If yes, what will it cost in added bonus compensation?

$ ___________

If not, what will it cost in potential lost profits?

$ ___________

How much am I willing to spend to assure this

acquisition is managed and integrated well?

$ ___________

17. Does this acquisition match the capabilities, capacities

and experience levels of my list of outside experts for
acquisitions?

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Yes _____ No _____

Do I need to add to or upgrade the talent pool?

Yes _____ No _____

How? __________________________________________

18. Do I really want this acquisition target?

Yes _____ No _____

How Much? (either way; 1 is a lot, 4 is not much)

1 2 3 4

20. Do I really believe this is a good investment?

Yes _____ No _____

How Much? (either way; 1 is a lot, 4 is not much)

1 2 3 4

21. What is the percent of "fit" overall, all in?

_______ %

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22. What is the one thing that will kill this deal?

_______________________________________________

_______________________________________________

*****
SECTION III
1. How old is the acquisition target?

______ years

2. What are the annual sales?

$ _______

3. How many employees?

______ employees

How many employees average in each of the last 5 years?

______ employees

4. What is the form of the business?

Corporation _____ S Corporation _____ Other __________

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If a corporation, what is the state of incorporation?

___________________________________

5. When you look at what this company is good at, what is

the actual core business?

Manufacturing _____ Distribution _____ Service _____

Marketing _____ Sales _____ Direct Marketing _____

Is that type of business you want and were planning to

acquire?

Yes _____ No _____

6. How long has the principal owned the company?

_____ years

7. How long have each of the senior managers been with

the company?

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Name Title Years

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

5. _____________________________________________

6. _____________________________________________

7. _____________________________________________

8. _____________________________________________

8. Where is the compensation of the principal and the

senior managers?

Excessive _____ Average _____Low _____

Where is the compensation of the other employees?

Excessive _____ Average _____Low _____

9. What is the annual total revenues?

$ _________ % of sales __100%___

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10. What is the annual cost of goods?

$ _________ % of sales _______

11. What is the annual cost of advertising?

$ ________ % of sales _______

12. What is the annual cost of fulfillment?

$ ________ % of sales _______

13. What is the annual cost of overhead?

$ ________ % of sales _______

14. What is the annual net profit?

$ ________ % of sales _______

15. What is the annual average margin?

% ________

16. What is the average order value?

$ ________

17. What is the average line items per order?

# ________

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18. What is the average number of orders per year per

customer?

# _______

19. What is the average life of a customer?

_________ years or months

20. What is the value of the inventory?

$ ________

21. How many inventory turns per year?

________ turns

How many turns in each of the last 5 years?

________ turns _______ turns _______ turns

________ turns _______ turns

22. How many SKUs?

_________ SKUs

23. What is the average order processing time (receipt to

ship)?

_________ days or hours

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24. Does the warehousing and inventory information system

work?

Yes ______ No ______

25. Is MIS a relational database system?

Yes ______ No ______

26. Will MIS have to be replaced, or can it be integrated

with my present system?

Replace ______ Integrate ______

Percentage chance of success of integration _________ %

27. Are the financial statements audited?

Yes ______ No ______

28. If a direct marketing company, what are each of the

following:

1. Total mailings in each of the last 5 years

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Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

2. Prospect to customer mailing ratio in each of the last 5 years

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

3. Overall prospect and customer response in each of the last 5 years

Customer Response

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Prospect Response

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

4. Overall average order value in each of the last 5 years

Year 1 ___________ Year 2 _________ Year 3 ________

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Year 4 ___________ Year 5 _________

5. Overall customer and prospect orders per thousand in each of the

last 5 years

Customer orders/M

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Prospect orders/M

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

6. Overall net profit or ROI by major product line in each of the last
5 years

Product Line #1

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Product Line #2

Year 1 ___________ Year 2 _________ Year 3 ________

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Year 4 ___________ Year 5 _________

Product Line #3

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Product Line #4

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

7. Overall advertising cost per M in each of the last 5 years

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

8. Overall net margin in each of the last 5 years by major product

line

Product Line #1

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Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Product Line #2

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Product Line #3

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

Product Line #4

Year 1 ___________ Year 2 _________ Year 3 ________

Year 4 ___________ Year 5 _________

9. Can this acquisition target provide ROI by product, by list, by

and by advertising vehicle?

Yes ______ No ______

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10. Can this acquisition target provide a full RFM breakdown of all
customer activity?

Yes ______ No ______

29. Is there enough potential to warrant going forward with

this acquisition candidate?

Yes _____ No _____

30. If "Yes" what is the window of acquisition opportunity?

__________ weeks/months/years

31. Am I better buying this now or waiting until it is

shopped by an M&A firm?

Now ______ Wait ______

32. I believe this acquisition is worth $ _____________

30. Do I REALLY want to own this company?

Yes _____ No _____

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*****

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