If considering a merger companies must conduct an analysis to determine whether the merger is financially viable. This includes analyzing the historical financial data of target businesses and predicting future performance to assess whether the deal is viable. Mergers can dramatically change the structure of an organization’s operations, financial standing, and market positioning. As a result, they can also pose significant risks and also challenge integration, culture alignment and customer retention.
Operational Evaluation
Business analysts carry out extensive analyses and studies of the operation of a potential company to give prospective buyers an in-depth picture of its strengths, weaknesses and opportunities. They can identify areas of improvement and suggest ways to increase productivity and increase the efficiency.
Valuation analysis
The most important aspect of a M&A deal is determining what the value of the target company to the acquiring firm. This is typically done by comparing trading comparables, prior transactions, and then performing the discounted-cash flow analysis. When conducting M&A analysis it is essential to use a variety of valuation methods as each one offers a unique perspectives.
Analysis of the accretion/dilution
The accretion/dilution calculator is a key tool to evaluate the impact of an M&A deal. It is a method that reveals how the acquisition will impact the pro-forma earnings per share (EPS). An increase in earnings per share (EPS) is considered accretive while a decrease is deemed dilutive. The accretion/dilution strategy is used to ensure that the price paid for a goal is reasonable in relation to its intrinsic value.