Merger Model
Introduction
In this section, we demonstrate how to model a merger of two public companies in Excel. Each topic contains a spreadsheet with which you can interact within...
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Company Information
We begin our M&A model by plugging into the spreadsheet some basic market data and corporate information about the target ("TargetCo") and acquirer...
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Enterprise Value
Let's now turn our attention to computing the enterprise values of the target and acquirer. To do so, we first need to calculate the number of fully diluted...
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Deal Assumptions
When building a model, it is important that the model be flexible enough to consider a wide range of possible scenarios. Let's now add some assumptions...
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Buyer’s Historical P&L
The first step in our merger analysis is to model BuyerCo's income statement to include historical results and projections. When sufficient data is available,...
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Cash-to-GAAP Reconciliation
Our next step is to reconcile our "cash" net income and EPS figures to the "GAAP" figures reported by BuyerCo in its public company filings. We do this...
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Wall Street Projections
Now that we have put together the BuyerCo's historical income statement, let's focus on projecting the income statement into the future. If the company...
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Our Own Estimates
Of course, we would like to project the income statement more than three years out. Since Wall Street equity research analysts typically project just one...
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Target’s Income Statement
We create TargetCo's P&L in nearly the exact same way that we put together BuyerCo's P&L, so we'll skip the intermediate steps and go straight to the final...
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LTM Balance Sheets
In this step we simply recreate the target's and acquirer's balance sheets using public company filings (e.g. 10-Ks, 10-Qs, or 8-Ks) from the last twelve-month...
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PPR – Enterprise Value
Our next step is to begin the purchase price ratio analysis ("PPR"). This analysis will show us what premiums and multiples the acquirer would be paying...
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PPR – Premiums Analysis
The next step in the purchase price ratio analysis is to calculate the premium (or discount) each transaction price represents relative to various historical...
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