IBD Technical Interview Question (GS/JPM/MS)
"How would I calculate “break-even synergies” in an M&A deal and what does the number mean?
To do this, you would set the EPS accretion / dilution to $0.00 and then back-solve in Excel to get the required synergies to make the deal neutral to EPS.
It’s important because you want an idea of whether or not a deal “works” mathematically, and a high number for the break-even synergies tells you that you’re going to need a lot of cost savings or revenue synergies to make it work. "
Can anyone explain the intuition behind this? I am having a hard time understanding it. Perhaps a link to an example would be helpful. Thanks in advance.
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