Practice
M&A · Conceptual
Walk through how a Contribution Analysis works for a 100% Stock M&A deal.
In a 100% Cash or Debt deal, the Seller's Equity Value doesn't show up anywhere in the Combined Equity Value. Did it just disappear?
How do you determine the Purchase Price in an M&A deal for a public Seller versus a private Seller?
If an Acquirer is much bigger than a Target it's acquiring, is a 100% Stock deal more or less accretive than if the two companies were closer in size, holding both companies' P/E multiples fixed?
If the Purchase Enterprise Value is the "true price," why are most M&A models built around the Purchase Equity Value instead?
What are the main problems or limitations of merger models?
What happens if a Buyer pays an Equity Purchase Price that's actually below the Target's Common Shareholders' Equity?
Why might one company want to buy another company?
Is there a shortcut for guesstimating accretion/dilution in a 100% Stock deal?
How can you tell whether an M&A deal will be accretive or dilutive?
What is the "true price" in an M&A deal, the Purchase Equity Value or the Purchase Enterprise Value? Why?
How does a merger differ from an acquisition?
How should you treat Stock-Based Compensation (SBC) in a merger model?
What are the advantages and disadvantages of each purchase method (Cash, Debt, and Stock) in M&A deals?
How do you calculate a Combined Company's Debt repayment capacity in a merger model?
How does an Acquirer typically determine the mix of Cash, Debt, and Stock to use in a deal?
Does the control premium an Acquirer pays for a Target actually "last" after the deal is announced?
How does a Value Creation Analysis work, and when is it actually a credible tool?
Why do companies focus so much on EPS in M&A deals, even though it's not the same thing as cash flow?
Why might an Acquirer choose to use Stock or Debt even if it could technically pay for the Target with 100% Cash?
Why do many merger models tend to overstate the impact of Synergies?
Why can a Combined Company's Debt/EBITDA ratio right after a deal closes be a misleading, "deceptive" number?
Without doing any math, what range would you expect a Combined P/E multiple to fall in after an M&A deal, and what determines where in that range it lands?
Why do Deferred Tax Liabilities get created in most M&A deals?
Which purchase method does a Seller typically prefer in an M&A deal, and why?
What are the main drawbacks of using an IRR vs. Discount Rate analysis to evaluate an M&A deal?
Are there cases where EPS accretion/dilution isn't that important? What else could you look at instead?
How do the Combined Equity Value and Combined Enterprise Value change based on the deal's financing method?
What's the issue with the "Pro-Forma EPS" figure many companies publish when announcing a deal?
Why can't you just take a simple average, or a weighted average, of the Buyer's and Seller's standalone multiples to determine the Combined Multiple?
Isn't the Foregone Interest on Cash just an abstract "opportunity cost"? Why do you actually deduct it in the model?
Are cash-free, debt-free deals really economically different from standard M&A deals?