Hi,
Could someone explain the process and steps to an accretion dilution model?
1) input the historic PnL for the acquirer and target
2) forecast the PnLs of both companies
3) create synergy assumptions
4) combine forecasted PnL and synergies to create pro Forma PnL
4) add the number of outstanding shares to the number of new issued shares for the acquisition (assuming 100% share acquisition), ignore the number of outstanding shares of the target company as they all get acquirered so are irrelevant?
5) divide the pro Forma net income for the acquisition year? by the number of outstanding shares of the acquirer plus the new issued shares
6) compare against the EPS of the acquirer standalone before acquisition
Am I right in this being a structured process to building one out? If not could someone explain the model and perhaps provide a step by step guide in building one out from scratch? thank you
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