If they are considering a merger, companies must perform analysis to determine whether the merger makes financial sense. To assess the viability of a merger, companies must analyze the historical financial data and anticipate the future performance of the target businesses. Mergers can dramatically change a company’s financial position as well as its market position and the structure of its operations. As a result, they can also create significant risk and challenge integration, cultural alignment and retention of customers.
Operational Evaluation
Business analysts conduct thorough analysis and research of the operation of a potential company to give prospective buyers an in-depth picture of its strengths, weaknesses and potential. This allows them to pinpoint areas of improvement and suggest measures that will improve productivity and boost the efficiency.
Analysis of valuation
The most crucial step in the process of completing an M&A transaction is establishing what the target is worth to the acquirer. This is usually done by comparing comparable trading transactions, previous transactions and the discounted-cash flow analysis. It is crucial to use several valuation techniques when conducting M&A analysis, since each has its own perspective on value.
Accretion/dilution analysis
The accretion/dilution calculator is an important tool to evaluate the impact of an M&A deal. It is a method that shows how the acquisition will affect the pro-forma earnings per share (EPS). A rise in EPS can be considered an accretive event, while any decrease is considered dilutive. The accretion/dilution strategy is used to ensure that the price paid for a goal is reasonable in relation to its intrinsic value.