When considering a potential merger companies must conduct an analysis to determine if the merger is financially viable. This involves examining the historical financial records of the businesses in question and predicting future performance to determine the viability of the merger. Mergers can dramatically change the structure of an organization’s operations, financial standing, and market position. They can also create significant risks and present challenges in terms of integration, cultural alignment, and customer retention.
Operational evaluation
Business analysts conduct extensive analysis and research of the operations of a target to provide acquirers with complete information about the company’s strengths as well as its weaknesses and opportunities. This helps them identify areas of improvement and suggest strategies to boost productivity and boost efficiency.
Analysis of valuation
The most important aspect of a M&A deal is determining the value the value of the target company to the acquiring company. This is usually accomplished by comparing trading comparables, precedent transactions and performing an analysis of cash flow that is discounted. It is crucial to utilize a variety of valuation techniques when conducting M&A analysis, as each offers a unique perspective on the value.
Analysis of accretion/dilution
The accretion/dilution tool is a crucial tool to assess the impact of an M&A deal. It is a method that shows how the acquisition will impact the buyer’s pro-forma earnings per share (EPS). An increase in earnings per share (EPS) is considered accretive and a decrease dilutive. The accretion/dilution model is used to ensure that the price given to the target is fair in relation to its intrinsic value.