Accretion Dilution
What is Accretion Dilution Analysis? Accretion and Dilution refer to a simple test that determines the impact of an acquisition or merger on the buying firm’s Earnings per Share (EPS). Accretion Dilution analysis helps the acquirer (buyer) weigh the consequences of the merger, incorporating all factors and complexities. Image from CFI’s M&A financial modeling...
Merger Consequences Analysis
What is Merger Consequences Analysis? Merger consequences analysis is important for assessing the impact of an M&A transaction. When the leadership/owners of a sufficiently sized company are pitched a merger or acquisition proposal, the company needs to take into consideration the financial impact that the transaction may have on the acquirer’s pro forma financial position....
Earnout
What is an Earnout? An earnout is a risk allocation mechanism for the acquirer wherein the purchase price is contingent on the “future performance” of the target company. The acquirer pays a majority of the purchase price upfront, at the time of closing the deal, and the remainder is contingent on the performance of the...
How to Build a Merger Model
How to Build a Merger Model A merger model is an analysis representing the combination of two companies that come together through an M&A process. A merger is the “combination” of two companies, under a mutual agreement, to form a consolidated entity. An acquisition occurs when one company proposes to offer cash or its shares...
Accretive
What is Accretive? In the financial context, accretive refers to an incremental benefit that occurs after a financial transaction. Depending on how it is used financially, it can refer to capital gains, a corporate finance transaction, or an accounting expense. Knowing the difference is pivotal to being an informed finance professional to ensure the data...
