Financial Analysis. Lesson 8. Mergers and Acquisitions (M&A) Analysis.

Financial Analysis. Lesson 8. Mergers and Acquisitions (M&A) Analysis

1. Mergers and acquisitions (M&A) involve companies combining or acquiring assets.

2. Synergy represents additional value generated when two companies merge effectively.

3. Accretive acquisition increases the acquiring company's earnings per share (EPS).

4. Dilutive acquisition reduces the acquiring company's earnings per share (EPS).

5. Goodwill is the excess paid over fair value in acquisitions.

6. Purchase price allocation (PPA) assigns value to acquired assets and liabilities.

7. Earnout is contingent payment based on the target company's performance.

8. Leveraged buyout (LBO) involves acquiring a company primarily through debt financing.

9. Due diligence assesses target company risks, financials, and legal aspects.

10. Post-merger integration combines operations, cultures, and processes post-acquisition.

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Technical Examples:

1. Using PPA, analysts assign fair value to acquired business components.

2. Earnout structure incentivizes target companies to meet performance milestones.

3. Synergy analysis estimates additional value potential from combined company operations.