To determine whether a merger makes financial sense, businesses must perform a thorough analysis. This includes a discounted cashflow (DCF), comparing and contrasting trading comparables, and precedent transactions. It also involves calculating prospective synergies that could be realized when the deal is completed. This is a complicated step that requires the expertise of a financial analyst who has expertise in M&A modelling.
In particular an accretion/dilution review is essential for determining the viability of the merger. This analysis determines if the deal will increase or reduce the post-transaction earnings per share (EPS) of the company that is acquiring. It starts by estimating pro-forma earnings per share (EPS) of the acquirer. A rise in earnings is considered to be a positive, whereas a decrease would be considered a negative.
The analysis should also take into account the impact of a merger on the current nature of competition in the market as well as between the merging companies. This includes the potential for negative effects on competition, for example, deals made to the merged company or a greater power concentration on the market. While there is some research that has been conducted on this issue and the need for more research, it is necessary to identify quantitative analyses suitable for assessing the impact on competition of horizontal data room pricing mergers. In addition, the research needs to investigate what other barriers to coordination already exist in the market and how a merger might alter this.