Accretion / Dilution Model for public acquirer and private target
IB
Tags:
(Monkey, 53
Points)
on 2/10/10 at 6:28pm
Would you just combine the P/L down to the NI line and then adjust for int exp, int foregone on cash, and synergies to see if its accretive or dilutive? (assuming its not an all stock deal)





Pretty much. Combine revenues
Pretty much. Combine revenues and any revenue synergies, take out COGS and operating expenses (less synergies), subtract interest expense (add income) based on post-transaction levels of cash and debt, remove taxes, and bam! Done.
That's a simplistic view. There will likely be additional D&A expenses due to capitalized financing fees, and the write-up in PPE and intangibles.
EDIT: You also calculate taxes based acquiror's tax rate. Don't just add the taxes of target and acquiror to foot to net income.