A well-thought merger analysis can be vital to the success of a deal. Custom B2B market research is vital to provide reliable and impartial market information that can aid in identifying the most critical weaknesses in due diligence.
Mergers can fundamentally alter the structure of an organization’s operations, financial position and overall strategic direction. They can also provide opportunities for cost savings, growth and synergies. Companies that are considering M&A must be ready to deal with the challenges that mergers may bring risks to integration, for example, and clashing cultures.
The most important part of preparing for M&As is to conduct an accretion/dilution investigation. This is a method of estimating pro forma net income to ultimately arrive at pro-forma earnings per share (EPS). An increase in EPS is thought of as beneficial, whereas an increase is thought of as dilutive. Wall Street is often against any deal that dilutes since it increases the risk of the acquisition.
Another important aspect to consider is whether there exists evidence of coordinated market effects or if the proposed merger would result in a coordinated interaction. Coordination can occur through coordinating pricing, allocating customers or coordinating capacity. Generally speaking, for coordinated interaction to be effective, there needs to be a clear understanding of the customers served by which competitors and the reason why prices and capacity are changing. It might be difficult to find enough evidence of coordination in the current market. However, a thorough analysis of a potential merger could aid in determining whether a merger can lead to coordinated interactions.