Mergers and Acquisitions (M&A))
If considering a merger businesses must conduct analysis to determine if the merger makes financial sense. This involves looking at the historical financial records of the businesses in question and predicting their future performance to assess the viability of the transaction. Mergers can significantly change a company’s financial position as well as its market position and the structure reference of its operations. They also carry significant risks and present challenges in regards to integration, cultural alignment, and retention of customers.
Operational Assessment
Business analysts conduct extensive research and a thorough evaluation of a target’s operations to provide buyers with complete information about the strengths as well as weaknesses and opportunities. This allows them to pinpoint areas of improvement and suggest ways to increase productivity and boost the efficiency.
Valuation analysis
The most crucial step in the course of an M&A transaction is establishing the value of the target to the company that is buying it. This is usually accomplished by comparing trading comparables to previous transactions and the discounted-cash flow analysis. It is important to use different valuation techniques when conducting M&A analysis, since each provides a different perspective on value.
Analysis of Accretion/Dilution
A key tool for evaluating the impact of an M&A deal is an accretion/dilution analysis model, which is a calculation of how the acquisition will affect the pro forma earnings per share (EPS). A rise in EPS is considered to be an accretive event, while any decrease is considered dilutive. The accretion/dilution method is used to ensure that the amount paid for the goal is fair relative to its intrinsic value.