Proforma P/E Ratio post merger?
Hi. I am very confused when calculating proforma P/E ratios post a merger. Confusion arising from Mergers & Inquisitions which states in their guide:
You always wipe out another company’s Equity Value and Shareholders’ Equity when you acquire it in an M&A deal because it no longer exists as an independent entity.
However, if it's a 100% stock deal, and A (market cap 1000, net income 100) is acquiring B (market cap 1000, net income 125), what will be the proforma P/E ratio? No synergies or premium assumed. Would we not add both market caps (1000+1000) and divide by combined net income of 225. If so, How would this answer be different if this was 100% debt or cash transaction instead?
Have a first-round interview coming up and my technicals are so rusty. Please can someone sensible help? This is a time-sensitive matter. Thanks a ton!
Eum sint qui ea eum. Cumque occaecati nam laudantium accusamus assumenda. Illum doloribus non est enim. Ex consequuntur sed nulla fuga sed ea molestiae. Doloremque magnam illo eum recusandae suscipit.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...