What are you inclined to do, in terms of your internal estimates in your underwriting model for the following case?

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You're on the buy side. You receive an offer to acquire a company; the company sends you its projections, which you instantly deemed to be aggressive. Management has projected its COGS margin 40% of sales.

Asked by Ovanhorne, Last updated: Nov 26, 2024

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2 Answers

J. Shatner, Content writer, Boston

Answered Aug 27, 2018

You are going to expect increase margin. This is due to the projections that are sent in by the company that you are supposed to acquire. There are several things that you can do in order to make this happen. You can increase your prices a bit. Do remember that you do not need to make the price hike staggering.

It can be just enough in order to increase your profit little by little. You can also limit the discounts that you are providing to people. You may do this when you are an established company and you know that people will still buy your items even if you would require the items to be bought at full price.