PMI Risk Index
The PMI Risk Index is a software-based application that analyses the possible threats from an individual M&A transaction for the acquirer. This is done by statistically calculating the risks in a post-merger integration before closing the deal, through benchmarking with a proprietary PMI database that contains more than 50,000 data points. Being one of the largest databases worldwide and containing PMI transactions from companies of a range of sizes in all major industries around the world, the PMI Risk Index can be applied to virtually any transaction.
The input for calculating the PMI Risk Index is a standardized questionnaire that contains 60 questions covering among other things financial data (such as revenue and EBITDA) and information on the organization and its people (such as number of employees and span of control) for the target company, the acquiring company and the new company.
As opposed to purely subjective estimations – such as the estimated degree of employee resistance - answering the PMI Risk Index questionnaire requires entirely quantitative data input (such as the number of redundancies), which can be validated on an objective basis.
With the questionnaire completed, the PMI Risk Index generates a 25-page report that provides detailed benchmarks with regard to expected synergies (synergy risks), organizational fit (structural risks), human resources (people risks) and integration management (project risks), starting with a high-level overview of the main risk areas identified. The quantitative results of the benchmarking are presented as color-coded risk quartiles.
The main section of the risk report contains detailed quantitative benchmarks that are also described by text modules supporting the interpretation of the quantitative results.