A scenario

What happens if we acquire a competitor

You buy revenue and you inherit a company. The first part is a line in a model. The second part is where the money goes, and it goes over the nine months nobody puts in the paper.

Run this on your own numbers All scenarios

Ships as a starter scenario: one lever, acquire, landing in month two, with a nine month integration and 18 percent attrition on the customers you bought.

Mechanics

What the model does with it

One lever does seven things at once. It is worth reading them separately, because they land on different lines and on different clocks.

Month 2

The purchase price leaves as cash, in one month

The price goes into the one off line, which is subtracted from cash in that month and then reset. There is no debt, no earn out, no deferred consideration and no share issue. If you leave the price at the default of eighteen months of the target's revenue, on the invented Harborline twin that is about 6.4 million dollars against 1.85 million of cash, and the run records the month cash went below zero and flags everything after it as hypothetical.

Month 2

A new customer segment appears, and it is not like your others

The acquired customers arrive as their own segment with fixed behaviour: elasticity multiplier 1.4, switching multiplier 0.6, contract multiplier 0.7, satisfaction 0.55. More price sensitive, less locked in and less happy than your existing base, which is the model saying out loud that they chose somebody else.

Month 2

You inherit cost as headcount, not as an org chart

The target's monthly cost is added to the extra cost line and headcount rises by that cost divided by your own cost per head. So the people you inherit are inferred from their cost line. A quality drag of 0.06 goes on for the integration, and a morale shock of 0.1 lands on your own people in the month of the announcement.

Months 2 to 11

Integration attrition is spread, not taken at the end

Every month of the integration window, the acquired segment loses the attrition assumption divided by the number of integration months. At the default of 18 percent over nine months that is two percent a month, applied ten times including the month of the deal, which compounds to about 18 percent gone. They leave quietly and they leave first.

Months 3 to 11

Two companies running at once shows up in delivery

The 0.06 quality drag sits in the quality target for the whole window. Quality itself moves 22 percent of the way to its target each month, so the dip arrives gradually and recovers gradually. Satisfaction trails quality at 18 percent a month, and churn takes the difference from every segment, not only the one you bought.

Month 11

Integration ends and the drag comes off

The lever books an event when the window closes and removes the quality drag. The inherited monthly cost does not come off. There is no synergy in this model unless you add one as a separate lever, which is the honest default: cost synergies are a decision somebody has to make, not a consequence of signing.

Throughout

The company you bought keeps competing with you

This is the one to know. The lever adds a segment and adds cost. It does not remove the acquired business from the competitor list. If you bought a named competitor, that competitor is still in the run, still pricing against you and still matching your moves. Take them out of the graph before you run this, or read the result as an acquisition that failed to remove a rival.

The ecosystem

Which agents move, and why

An acquisition is the scenario that touches the most agent classes at once, which is exactly why it is the hardest one to hold in a spreadsheet.

The acquired customers are a segment with the least loyalty in the model: 1.4 times the elasticity, 0.6 times the switching cost, 0.7 times the contract lock. They are the ones the attrition rate takes
Your own customers feel the integration through quality and satisfaction, which is how a deal that looked contained becomes a churn number
Your own employees take a 0.1 morale shock, which decays by keeping 55 percent of its size a month, and morale drives attrition through an exponential with backfill at 70 percent and full hiring cost
The investor watches cash. A purchase price paid in one month against a covenant floor is the fastest route to the event nobody wants in the run
The finance lead protects cash at weight 0.4 and will cut headcount and marketing if runway goes, which is how an acquisition ends in a redundancy round
The competitor you bought carries on, unless you remove it from the graph first

The levers and the numbers

What this answer is standing on

Input	Default if you leave it	Why it matters more than the price
Purchase price	Eighteen months of the target's revenue	Paid from cash in one month. This is the number most likely to break the run rather than the deal
Target monthly revenue	Thirty percent of yours	Sets the size of the acquired segment and, through it, everything the attrition rate eats
Target monthly cost	Seventy five percent of its revenue	Becomes permanent extra cost and inferred headcount. Nothing takes it back out
Integration months	Nine	Sets how long the quality drag runs and how the attrition is spread
Customer attrition during integration	Eighteen percent	Applied as a monthly rate, so the compounding result is close to but not exactly the figure you typed
Your own cost per head	From the ledger	Converts the inherited cost into inherited headcount, which then drives capacity and utilisation
Cash on hand and the covenant floor	From the ledger	Together they decide whether the scenario is a plan or a warning

Set the first three from the actual information memorandum rather than the defaults. The defaults exist so the lever runs, not so you can trust them.

Honestly

Where this is weakest

Of the twelve scenarios this is the one with the largest gap between what the model does and what the decision involves. It is useful for the shape and the timing of integration damage. It is not a deal model.

No financing structure. Everything is cash, in one month. Debt, earn outs, deferred payments and equity are absent, and they are usually the whole negotiation
No cost synergy, no revenue synergy, no cross selling. If you believe in them, add them as separate levers and label them clearly, because they are the assumptions most likely to be wrong
The acquired business stays in the competitor set unless you remove it yourself
Inherited headcount is derived from inherited cost, so a target with a very different cost per head will be misrepresented in capacity and utilisation
No culture, no systems migration, no customer overlap. Two companies selling to the same customer produce one customer, and this model produces two
No goodwill, amortisation, tax or accounting treatment of any kind. This is an operating model, not a set of accounts

What this cannot tell you

The bad half

Six hundred and forty runs, and the ones that end badly

Every square is one replication of the same decision with different draws from your own uncertainty. On an acquisition the dark squares cluster for a reason worth reading: they are mostly the runs where the purchase price took cash below the covenant floor early, not the runs where integration went worse than expected. Which failure dominates tells you which number to negotiate.

What people ask about this one

Should I remove the target from my competitor list before running this?

Yes, if the point of the deal is to remove a competitor. The lever does not do it for you.

Run it both ways if you want the value of the competitive removal on its own. The difference between the two runs, on the same baseline and the same seeds, is what taking that rival out of the market is worth under your current assumptions.

Why do the acquired customers churn even when the integration goes well?

Because the attrition rate is applied every month of the window regardless of how the run is going. It is a flat assumption, deliberately, and it represents customers who chose the other company and now find themselves with you. If you have evidence for a different number, replace it in the lever and the band will follow.

Can I model paying with debt?

Not directly. The nearest approximation is to raise capital as a separate lever in the same month, which puts cash in and starts an investor clock, then let the purchase price take it out. That models the cash but not the interest or the repayment schedule, and the brief should say so when you write it up.

How do I model a smaller bolt on rather than a merger of equals?

Set the target revenue and cost to the real figures. The defaults scale off your own revenue, which is convenient and wrong for a small deal. A bolt on at five percent of your revenue behaves very differently from the default at thirty, mostly because the morale shock and the quality drag are fixed sizes and do not scale down with the target.

The questions this one leads to

Enter a new marketThe slow version of the same ambition, with the cost spread out instead of paid up front.A competitor launches against your baseWhat the rival you did not buy does next.Eliminate a departmentThe synergy this scenario will not give you unless you model it yourself.The assumption ledgerCash, the covenant floor and cost per head decide most of this answer.How accurate this isThis page is the clearest case of a scenario that models the operating consequences and not the deal.

Model the year after signing

The paper covers the price. This covers the nine months after it, on your own numbers, with a band around the answer and a list of what it is standing on.

Build a twin All fifteen scenarios