What is a Merger?

A merger is when two or more companies combine to increase value and enhance operations. This is a pre-agreed action and is not seen as hostile. A merger should always provide increased benefits and Earnings Per Share for shareholders in both companies, or else it is unlikely to be worth doing. The process for a merger model is as follows:

  • Calculate Purchase Price - this can be done using precedent transactions, public comparable companies and a DCF valuation.
  • Determine Financing Method - calculate the percentage of the deal which will be financed by debt, equity and stock.
  • Project & Combine Financial Profiles - the Income Statement, Balance Sheet and Cash Flow Statement of both the buyer and seller must be combined and adjusted for acquisition effects.
  • Calculate Accretion & Dilution - work out the change in EPS and create sensitivity tables to model different scenarios.
Excel Modeling Course

Everything You Need To Master Excel Modeling

To Help You Thrive in the Most Prestigious Jobs on Wall Street.

Learn More

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: