Mergers and Acquisitions (M&A))

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Companies need to conduct an analysis when considering a merger to determine whether the deal is financially viable. This includes analyzing the historical financials of the target companies and predicting future performance to determine the viability of the transaction. Mergers can drastically alter the operational structure of a business, its financial standing, and market positioning. As a result, they can also create significant risk and pose a challenge to integration, cultural alignment, and customer retention.

Operational Assessment

Business analysts conduct extensive analyses and studies of the operations of a target company to give buyers an in-depth picture of its strengths, weaknesses, and opportunities. This helps them identify areas to improve and recommend actions that can increase efficiency and productivity.

Valuation analysis

The most important aspect of a M&A deal is determining what the target company’s worth to the company that is buying it. This is typically done by comparing comparable trading transactions, previous transactions, and the discounted-cash flow analysis. When conducting M&A analyses, it is important to use different valuation techniques as each one offers a distinct perspective.

Analysis of Accretion/Dilution

The accretion/dilution method is a key tool to assess the impact of an M&A deal. It is a calculation that reveals how the acquisition will impact the buyer’s pro-forma earnings per share (EPS). A rise in earnings per share (EPS) is considered to be accretive while a decrease is deemed dilutive. The accretion/dilution model is employed to ensure that the amount given to the goal is fair in relation to its intrinsic value.

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