Deal effect on profit
- Added GBP 4,016,000 · Financing GBP 2,240,000 · Net GBP 1,776,000 a year.
Executive Intelligence · Decision Intelligence and Simulation
What-If Decision Simulator
A person changes stated assumptions and sees the effect on verified baselines through documented formulas.
Demonstration: Dunmore Building Services (fictional) · Construction services. Fictional data and a scripted answer.
The situation
- Organisation
- Dunmore Building Services (fictional)
- Who is asking
- Chief executive
- Industry
- Construction services
- What happened
- The CEO is considering acquiring a smaller competitor and wants to see what the deal does to profit under different assumptions before the board meets.
The question asked
What happens to our profit if we buy this firm, and how sensitive is that to how much of its revenue we keep?
What it reads, and who can see the result
- Target's accounts (summary) documentRevenue and costs from the data room summary.
- Our current results exportThe base we start from.
- Reads
- The target's summary accounts and our results.
- Does not read
- Employee or customer-level records.
- Permission
- Corporate development access.
- Who sees it
- The CEO, the CFO and the board.
Try it
Change the assumptions. Every result and the answer below are recomputed from them, and a warning appears when a result crosses a stated limit.
- Target revenue kept
- GBP 22,400,000Target revenue 28,000,000; operating margin 9%.
- Operating profit from the target
- GBP 2,016,000
- Profit added to ours, with savings
- GBP 4,016,000
- Annual cost of the money
- GBP 2,240,000
- Net annual effect on profit
- GBP 1,776,000
The answer
Simulated answer. Written for this fictional case, not produced by a live model. Only the figures in it are computed, from what you decided above.
On these assumptions the deal adds GBP 4,016,000 of profit and costs GBP 2,240,000 a year to finance: net GBP 1,776,000.
Keeping 80% of the target's revenue yields GBP 2,016,000 of operating profit, plus GBP 2,000,000 of savings [S1]. The money to pay for it costs GBP 2,240,000 a year at 7% [S2].
The result turns on two things the data cannot settle: how much revenue stays after the sale and how real the savings are. Move both before reading the net effect as a verdict.
Relies on: S1 · Target summary accountsS2 · Our results, last twelve months
No approval is needed for this result: it is read-only insight, and nothing consequential happens because of it.
What it produces
Before the board
- Stress-test revenue retention and the savings; those decide the answer.
Limits of this example
- A single-year view: integration costs and growth are ignored.
- The target's figures are a summary, not diligence.
- This is a scripted demonstration on fictional data. No model was called and no real organisation, person or result is shown.
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