Merger Analysis

The session illustrates the key issues around the financial analysis of an M&A transaction. After setting the big picture, a simple M&A model is built, focusing on earnings accretion/dilution and relative P/E analysis The example is then expanded to incorporate a pro-forma balance sheet, to calculate credit ratios, ownership dilution, a contribution analysis and an analysis at various prices. Finally, the outputs of the model are used to identify a suitable financing mix and a maximum offer price.

Key topics:

• The relevance of M&A analysis
• Quick-and-dirty analysis versus full-blown analysis
• Preparing key acquisition data
• Building a flexible funding structure
• Earnings accretion/dilution analysis
• Using relative P/Es
  • Acquirer P/E versus offer P/E
  • Debt P/E
• Synergies-to-break-even analysis
• Sensitivity analysis
• Calculating and understanding contribution analysis
• Using an analysis-at-various-prices table
• The strategic implication of different financing alternatives
• Identifying the maximum offer price