Financial Analysis for a Potential Merger

In order to determine if a merger makes financial sense, businesses must do a thorough study. This includes a discounted cashflow (DCF), comparing and the trading equivalents of precedent transactions. It also involves calculating future synergies to be realized once the deal has been concluded. This is a complex step and requires the assistance of a competent financial analyst who knows M&A modeling.

An analysis of dilution and accretion is vital to determine the profitability. This analysis determines whether the merger will enhance or decrease earnings per share (EPS), post-transaction, of the company that is acquiring. It starts by estimating pro-forma earnings per share (EPS) of the buyer. An increase in earnings is thought to be a positive, while a decline is considered to be negative.

The analysis should also consider the impact of a potential hop over to this web-site merger on the current nature of competition on the market and between the merging companies. This includes the potential for anti-competitive impacts, such as deals made to the merged company or a greater concentration of power in the market. There is some research on this subject however more work is needed to determine quantitative studies that are suitable for assessing competitive impacts of horizontal mergers. Additionally, the research should look at what other obstacles to coordination are already in the market and how a merger could change this.

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