When companies are involved in the process of evaluating potential mergers an in-depth analysis is needed to determine whether the merger is financial sense. This is done by calculating a discounted cash flow (DCF) model for each company, comparing and contrast with trading comparables and prior transactions. It also involves calculating future synergies that will be realized after the deal is concluded. This is a complicated step that requires the expertise of an analyst in finance who has expertise in M&A https://www.mergerandacquisitiondata.com/how-do-lps-measure-performance-of-a-vc-fund modeling.
An analysis of dilution and accretion is vital to determine the profitability. This analysis determines whether the merger will enhance or decrease earnings per share (EPS), post-transaction, of the acquirer. It begins by estimating proforma net income in order to calculate the pro-forma earnings per Share (EPS). A rise in earnings is thought to be a positive, whereas a decline is regarded as a negative.
The analysis should also take into account the effect of a possible merger on the nature of competition in the marketplace and between the merging companies. This includes the possibility of anti-competitive impacts, such as offers made to the merged company or an increased power concentration on the market. There is some research on this subject, but more work is needed to determine quantitative studies that are appropriate to evaluate the effects on competition of horizontal merges. Additionally, the research should investigate what other barriers to coordination currently exist in the market and how a merger would alter these.