What type of research goes into a merger analysis?


Quick Answer

Deal makers conduct research to establish what impact the merger will have globally, whether the process will be without disagreements, and whether the two merging entities will be compatible. The wheel dealers usually carry out an acid test referred to as the accretion and dilution analysis.

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What type of research goes into a merger analysis?
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Full Answer

To successfully broker a deal, the analysts must establish whether the deal goes on smoothly and whether they receive payments. The accretion and dilution analysis is a test on whether a contemplated merger increases or decreases shareholder value in Earnings Per Share.

The analysis tries to estimate the Pro-forma net income for the combined companies. To arrive at a Pro-forma EPS, calculate the combined company new share count, check the accuracy of the numbers, and divide a Pro-forma net income by Pro-forma shares, as stated by Investopedia.

The accretion and dilution analysis does not give the full picture as it is typically calculated using one or two years projection, Investopedia argues. Some estimates may not be taken into account as some mergers take longer than two years to mature.

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