A well-thought-out analysis for any merger that is in the pipeline could be vital to the successful completion of an acquisition. Custom B2B research is essential to provide accurate, impartial market analysis that can help to identify the key weaknesses in due diligence.
Mergers could dramatically alter the financial position of a business, its operational structure and strategic direction. They also present opportunities for cost reduction, growth, and synergies. However, companies looking to make M&A deals must be prepared to address numerous issues that can result from mergers, such as integration risk and clashing corporate styles.
The most important step in preparing for M&A is to conduct an accretion/dilution analysis. This is a method for making estimates of pro forma net income in order to calculate pro forma earnings per share. An increase in EPS can be considered accretive, while the decrease in EPS is regarded as dilutive. Wall Street is often against any deal that dilutes, because it increases the risk of the acquisition.
Another important aspect to consider is whether there is evidence of coordinated effects in the market or whether the proposed merger will result in a coordinated interaction. Coordination can be achieved through coordinating pricing or allocating customers. In general, for coordinated interactions to occur it is necessary to know who serves whom, and why. It might be difficult to establish sufficient evidence of coordination on the market. However, a review of a possible merger may determine whether a deal can lead to coordinated interactions.