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 about the transaction that, when changed, will flow through the model. The assumptions presented below are simply suggestions, and the specific transaction you are contemplating may call for other assumptions. In any case, most or all of the deal assumptions should be grouped into a single section of your model so that anyone can see, at a glance, what assumptions you are making.
Note that, in the spreadsheet below, we have left the tax rate blank. The tax rate used is the acquirer’s tax rate, which we will determine in a subsequent step.