Analysis For a Potential Merger

An analysis that is well-thought out for any merger that is in the pipeline could be vital to the successful completion of an acquisition. Custom B2B market research is essential to provide accurate and objective market information that will help identify critical deficiencies in due diligence.

Mergers have the potential to dramatically alter the financial position of an organization, operational structure and strategic direction. They also provide opportunities for growth, synergies, and cost savings. Companies pursuing M&A should be prepared to tackle the issues that mergers could bring like integration risk and clashing cultures.

The most crucial aspect of preparing for M&As is to conduct an accretion/dilution investigation. This is the process of estimating pro forma net income and then calculating pro-forma earnings per share (EPS). A rise in EPS is thought of as an accretive event, whereas a decrease is viewed as dilutive. Wall Street is often against any deal that dilutes, as it adds to the risk of the acquisition.

A second important consideration is to examine if there is any synergistic effects on the marketplace or if the proposed merger will result in coordinated interactions. Coordination can be achieved by coordinating pricing or allocating customers. In general, for coordinated interactions to be effective, there needs to be a clear understanding of the customers served by which competitors and the reason why prices and capacity are changing. It might be difficult to determine the evidence needed for coordination on the market. However, an analysis of a potential merger could determine whether a deal can lead to coordinated interactions.

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