Merger Modeling Basics

Course Goals & Overview:
This merger modeling course builds on top of our M&A Deal Structuring course in which you will build an accretion / dilution analysis, a generic "ability to pay" analysis, and a simple merger model slapping together two income statements, selected balance sheet items and cash flow sweep for debt payment. This course will allow you to quickly understand basics of merger modeling. To maximize your learning in this module, you need to absolutely understand the concepts in our M&A Deal Structuring course! This course serves as the backdrop to our super-advanced, complex merger modeling course.

Course Sections:
Accretion Dilution Model
- Build dynamic merger consequence analysis (accretion / dilution) incorporating the following:
- Synergies switch, cash vs. stock sensitivity
- Amortization of goodwill switch (depending on purchase price allocation)
- Common structural issues: Stock vs asset deals and 338 (h)(10) elections
- Tax implications of transactions based on deal structure and FASB 142 goodwill amortization
- Analysis of breakeven PE for both 100% stock and 100% cash considerations
- Calculate pre-tax and after-tax synergies / cushion required to breakeven

Ability to Pay Analysis
- Construct an "Ability to Pay" Analysis, a reverse Accretion / Dilution analysis
- Calculate maximum equity value and enterprise value based on cost of debt
- Sensitize analysis based on interest rates and pre-tax synergy assumptions

Simple Merger Model
- Construct a merger model, simple combination of Income Statement for target and acquiror
- Project simple stand-alone Income Statement for both target and acquiror
- Analyze selected balance sheet figures and ratios and multiples
- Estimate target valuation and deal structure
- Calculate selected Pro Forma balance sheet items
- Combine target and acquiror's Income Statement and estimated synergies
- Calculate cash flow for debt repayments to estimate debt repayments and cash balances
- Compute interest expense and interest income based on paydowns
- Calculate accretion / dilution and credit ratios

Video Length / Estimated Total Course Time:
1.5 hours / 2.5 hours


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