When companies are involved in the process of evaluating mergers an in-depth analysis is required to determine whether the merger is in sense financially. This involves a discounted cashflow (DCF), comparing and the trading equivalents of precedent transactions. It also involves calculating future synergies to be realized after the deal is completed. This is a difficult step and requires the assistance of a highly skilled financial analyst who understands M&A modeling.
An analysis of dilution/accretion is essential to determine the profitability. This analysis determines if a deal will increase or reduce the post-transaction earnings per share (EPS) of the company that is acquiring. It begins by estimating pro-forma net income to arrive at the pro-forma Earnings per Share (EPS). A rise is considered to be accretive, while the opposite check out the post right here would be considered dilutive.
The analysis should also take into account the impact of a merger on the current nature of competition in the market as well as between the merging companies. This includes the potential for anti-competitive effects, like deals made to the merged company or a higher power concentration on the market. There is some research in this field, but more work is needed to determine quantitative studies that are suitable for assessing the impact on competition of horizontal merges. Moreover, the research should investigate what other barriers to coordination currently exist in the market and how a merger could alter these.
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