Mergers and Acquisitions (M&A))

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Companies need to conduct an analysis when considering a merger to determine if the proposed deal is financially feasible. To determine the viability of the merger, companies must examine the financial records of the past and forecast future performance of the targeted businesses. Mergers can dramatically alter the financial standing of a company, market position, and the structure of its operations. They can also create significant risks and pose challenges in terms of integration, cultural alignment, and retention of customers.

Operational Evaluation

Business analysts conduct thorough studies and assessments of the operation of a potential company to give prospective buyers an entire picture of the company’s strengths, weaknesses and potential. This allows them to pinpoint areas to improve and recommend strategies to improve productivity and increase the efficiency.

Analysis of valuation

The most important part of a M&A deal is determining what the value of the target company to the acquirer. This is usually done through comparing trading similars, prior transactions, and then performing a discounted-cash flow analysis. It is important to use different valuation techniques when conducting M&A analysis, since each one offers a unique perspective on value.

Analysis of the accretion/dilution

The accretion/dilution tool is an important instrument to evaluate the effect of an M&A deal. It is a calculation that shows how the acquisition will affect the buyer’s pro-forma earnings per share (EPS). An increase in EPS can be considered positive, whereas any decrease is considered dilutive. The accretion/dilution method is used to ensure that the consideration paid for the goal is fair relative to its intrinsic value.