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How To Build A Merger Model Workout Empty

This document serves as a training guide on how to build a merger model, specifically focusing on cash M&A deals. It includes detailed sections on acquisition assumptions, valuation, sources and uses of funds, and proforma financial metrics. The document outlines key calculations and considerations for evaluating the financial impact of a merger.

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Siya Halapeti
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25 views6 pages

How To Build A Merger Model Workout Empty

This document serves as a training guide on how to build a merger model, specifically focusing on cash M&A deals. It includes detailed sections on acquisition assumptions, valuation, sources and uses of funds, and proforma financial metrics. The document outlines key calculations and considerations for evaluating the financial impact of a merger.

Uploaded by

Siya Halapeti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

874613196.

xlsx
Welcome

How to build a Merger Model

This document is for training purposes only. Financial Edge accepts no responsibility or liability for any other purpose or usage.

© 2025 Financial Edge Training

© 2016 Page 1 of 6
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Info

How to build a Merger Model


Workout Information
Features Model Details
◦ Cash M&A deal Company name ABC Incorporated
Date 31-Dec-15
Currency
Units
Analyst Name Firstname Lastname
Circular Switch 0.0

Tab Structure Formatting


Tab 1 Cash M&A deal
Input
Hard coded
Formulas

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Workout

How to build a Merger Model

Workout
Acquisition assumptions and valuation
Acquirer Target Options outstanding Strike Dilution
Current share price 18.00 4.00 5.0 3.00
Share premium 25.0%
Acquisition price per share
Shares outstanding 31.0
Diluted shares outstanding 15.0
Market cap
Acquisition equity value
Existing net debt 40.0
Pension deficit adjustment 20.0
Total acquisition EV
Working capital adjustment 10.0

Other assumptions
Synergies 5.0
% equity financing 30.0%
Cost of acquisition debt 5.0%
Tax rate 30.0%
Fees % EV 0.5%

Sources and uses of funds


Acquisition equity value Revolving credit facility
Existing net debt Debt funding
Pension deficit adjustment Equity funding

© 2016 Page 3 of 6
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Workout

Working capital adjustment


Fees
Total uses of funds Total sources of funds

Share issuance and ownership Amount %


Acquirer shares outstanding
New shares issued
Proforma shares outstanding

Relative P/Es Year 1 Year 2 Year 3


Acquirer P/E
Acquisition P/E
Debt P/E

EPS accretion / (dilution)


Acquirer Actual Year 1 Year 2 Year 3
EPS forecast 1.20 1.26 1.32 1.39
WASO 15.0 15.0 15.0 15.0
Net income

Target Actual Year 1 Year 2 Year 3


EPS forecast 0.24 0.28 0.33 0.36
WASO 33.0 33.0 33.0 33.0
Net income

Proforma Actual Year 1 Year 2 Year 3


+ acquirer net income
+ target net income
+ synergies post tax
- Interest on acquisition debt post tax
Proforma net income
Proforma shares oustanding

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Workout

Proforma EPS
Acquirer EPS
EPS accretion / (dilution)

Proforma debt ratings Acquirer Target Proforma


EBITDA 156.0 20.0
Debt 300.0 40.0
Debt / EBITDA

Synergies vs premium analysis


Acquisition equity value
Market cap
Premium paid

Wacc 7.0%
Risk premium 3.0%
Discount rate

Year 1
Post tax synergies
Present value of post tax synergies
Value created / (destroyed)

Return on invested capital


Year 0 Year 1
Target EBIT 16.0
Target NOPAT
Post tax synergies
Adjusted NOPAT

Invested capital
ROIC

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Workout

End

© 2016 Page 6 of 6

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