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Mergers and Acquisitions (M&A))

When considering a potential merger companies must conduct an analysis to determine whether the deal makes financial sense. To determine if the merger is feasible of a merger, companies must analyze the historical financial data and predict future performance of the target businesses. Mergers can fundamentally alter the structure of an organization’s operations, financial standing, and market position. As a result, they can also introduce significant risk and challenge integration, cultural alignment and retention of customers.

Operational assessment

Business analysts carry out extensive research and evaluations of the operations of a target company to give prospective buyers an accurate picture of its strengths, weaknesses, and opportunities. This allows them to identify areas of improvement and suggest ways to improve efficiency and productivity.

Valuation analysis

The most important step in the course of an M&A transaction is to determine what the value of the target to the acquiring company. This is usually accomplished by comparing trading comparables, precedent transactions and performing a discounted cash flow analysis. When conducting M&A analysis it is essential to employ various valuation techniques because each offers a unique perspective.

Analyzing accretion/dilution

The accretion/dilution method is an essential tool to assess the impact of an M&A deal. It is a method that reveals how the acquisition will impact the buyer’s pro-forma earnings per share (EPS). An increase in EPS is viewed as positive, whereas the decrease in EPS is viewed as dilutive. The accretion/dilution strategy is used to ensure the price paid for a target is fair in relation to the intrinsic value.

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