Project Medion

A buy-side M&A advisory case analysing Lenovo’s proposed acquisition of German consumer-electronics company Medion AG from valuation through transaction execution.

The objective was not simply to determine what Medion was worth, but whether Lenovo should acquire it, how much it could rationally pay, where the value creation would come from and how the transaction should be structured.

The challenge

Our analysis suggested that Medion was worth approximately €10 per share on a standalone basis, while Lenovo’s contemplated offer was €13 per share. That meant the deal could not be justified by standalone valuation alone.

The transaction also presented a structural problem: owning more than 50% of Medion was sufficient for consolidation, but not enough to achieve the cash access and operational control Lenovo needed to fully execute the strategic rationale.

The investment case therefore depended on answering two questions — can Lenovo create enough incremental value to justify the premium, and can the transaction be structured so Lenovo can actually capture that value?

The process

We approached the transaction as a full buy-side advisory mandate.

For valuation, we triangulated Medion’s standalone value using trading comparables, DCF and the undisturbed share price:

We then built the strategic synergy case from the bottom up. Instead of applying a broad synergy percentage to revenue or total costs, we isolated approximately €691m of procurement spend where Lenovo’s substantially greater purchasing scale could realistically influence pricing.

Using 3–6% procurement savings, a 50% execution haircut and tax, we estimated a base synergy value of approximately €3.6 per share. That was critical because it exceeded the approximately €3 per share acquisition premium.

We then analysed the transaction structure under German takeover and corporate law. The recommended route was a public offer targeting 75% ownership followed by a Domination & Profit-Transfer Agreement (DPLTA) — the minimum structure capable of giving Lenovo the operational control and economic access required to capture the identified synergies.

Finally, we mapped the shareholder structure, execution timeline, stakeholder strategy, transaction risks and explicit walk-away conditions.

The outcome

Our recommendation was to proceed at €13 per share — conditionally.

The logic was straightforward: approximately €10.0 of standalone value plus approximately €3.6 of Lenovo-specific synergy gives approximately €13.6 of value to Lenovo, against an offer price of €13.

The recommendation therefore included a strict ~€13.6 per share walk-away ceiling and four conditions:

• Brachmann must be secured.
• A credible route to the 75% threshold must exist.
• Lenovo must obtain the ability to execute the procurement integration underlying the synergy case.
• Total transaction cost must remain below the synergy-adjusted value ceiling.

The result was not simply a valuation conclusion but a complete transaction recommendation connecting price, strategic value creation, control, execution and risk.