Companies must conduct an analysis while considering a merger to determine if the deal is financially viable. This involves examining the historical financial records of the businesses in question and predicting their future performance to determine the viability of the merger. Mergers can dramatically change a company’s operational structure, financial standing, and even its market position. They can also bring substantial risks and pose problems in regards to integration, cultural alignment and customer retention.

Operational Assessment

Business analysts carry out extensive analyses and studies of the operation of a potential company to give buyers an entire picture of the company’s strengths, weaknesses, and opportunities. This helps them identify areas to improve and suggest ways to improve efficiency and productivity.

Valuation analysis

The most important part of the course of an M&A deal is determining what the target is worth to the company that is buying it. This is typically done by comparing comparable trading transactions, precedent transactions and performing a discounted cash flow analysis. It is crucial to use several valuation techniques when conducting M&A analysis, since each offers a unique perspective on the value.

Analysis of accretion/dilution

A key tool for evaluating the impact of an M&A deal is an accretion/dilution model which calculates how the acquisition will impact the pro forma earnings per share (EPS). A rise in EPS is considered to be accretive, while a decrease is seen as dilutive. The accretion/dilution method is used to ensure that the price paid for a goal is appropriate in relation to its intrinsic value.

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