TruthCRM Competitive Auction in Mergers and Acquisitions Simulation

by Peter Bershatsky, Peter D. Goodson, Victor Lecelere, Hannah Greenberg, Christine Jan, and Andrew King

The TruthCRM case provides students with an interactive simulation of the competitive auction process to maximize value for a company involved in an acquisition. This simulation can be also used as a capstone course/project for corporate finance and negotiations. Even though TruthCRM is a fictitious software firm, the case is based on the authors' combined 70-years of experience in conducting these types of auctions. Both authors - on the BerkeleyHaas faculty at the University of California, Berkeley - believe that this simulation is the most real-world reproduction of an acquisition process possible in the classroom. While Truth CRM, a San Francisco-based software firm, is the target of a possible acquisition, the class is split into five role-playing teams to facilitate the simulation: TruthCRM itself (target company); Tilted Halo (Truth CRM's investment bankers); Tank Software (Potential strategic acquirer with large asset base and steady cash flow); High-Flyer Software (Potential strategic acquirer looking to sustain its growth potential); and Magic Beans (Potential private equity firm acquirer). While the auction takes place in a 90-minute class session, the simulation itself is rolled out over a three-week period prior, with individual meetings between Tilted Halo and each of the three potential acquirers to provide guidance and to answer any due diligence concerns, followed with price and term negotiations. Over these three weeks, many corporate finance concepts are reviewed, including valuation, due diligence, synergy, term sheets, negotiations, etc. In the end, TruthCRM’s board must decide which of the suitors' competitive bids to choose or stay independent by pursuing an IPO instead. Prepared handouts, videos, and other supporting material are available to the instructor to help facilitate this simulation.


Pub Date: April 1, 2023

Discipline: Mergers and Acquisitions

Subjects: Mergers and Acquisitions, Corporate Finance, Valuation, Negotiations, Value creation, Private equity, Auctions, IPO, Board of Directors

Product #: B6031-PDF-ENG

Industry: Software publishing

Geography: United States, California

Length: 10 page(s)

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