In order to determine if a merger would make financial sense, companies should do a thorough study. This involves executing a discounted cash flow (DCF) model for each business, and comparing and contrast with trading comparables and similar transactions. It also involves calculating future synergies to be realized once the deal is closed. This is a challenging process that requires the expertise of an analyst in finance who has expertise in M&A modelling.
A dilution/accretion analysis is crucial in determining the profitability. This analysis determines if the merger will increase or decrease earnings per share (EPS), post-transaction, of the company that is acquiring. The process begins by estimating the pro-forma net income to determine the pro-forma earnings per Share (EPS). An increase in earnings is thought to be a positive while a decrease would be considered a negative.
The analysis should also take into account the impact of the merger on the nature of the competition between the merging companies and the market. This includes the possibility of adverse effects to competition, such as deals made to the merged company or a heightened power of the market. While there is some research in this area, more work is needed to identify quantitative analyses suitable for https://www.mergerandacquisitiondata.com/the-importance-of-conducting-vdr-analysis-for-a-potential-merger/ assessing the impact on competition of horizontal mergers. Moreover, the research should analyze what other obstacles to coordination currently exist in the market and how a merger would change this.
