Financial Analysis for a Potential Merger

When companies are in the process of evaluating mergers an in-depth analysis is required to determine if the merger is financial sense. This includes performing the discounted cash flow (DCF) model for each business, and comparing and contrasting it with trading counterparts and prior transactions. It also involves calculating future synergies which will be realized after the deal is closed. This is a challenging step and requires the expertise of a highly skilled financial analyst who knows M&A modeling.

A dilution/accretion analysis is vital in determining the profitability. This analysis determines if the merger will enhance or decrease the earnings per share (EPS), post-transaction, of the company that is acquiring. The process begins by estimating the pro-forma net income in order to calculate the pro-forma earnings per Share (EPS). A rise is regarded as accretive, while any decrease is considered dilutive.

The analysis should also consider the impact of a merger on the current structure of competition in the marketplace and between the merging companies. This includes the potential for anti-competitive impacts, such as offers made to a merged company or an increased power of the market. While there is some research on this subject and the need for more research, it is necessary to find quantitative analyses that are suitable for rimplement digital signing solutions in your company assessing the impact on competition of horizontal mergers. Additionally, the research should examine what other impediments to coordination are already in the market and how a merger could alter these.

Leave a Reply

Your email address will not be published. Required fields are marked *