Welcome back to the Wall Street Prep Quick Lesson Series!
An important part of investment banking is understanding mergers and acquisitions (M&A). Within M&A, One of the core models investment banking analysts and associates have to build when analyzing an acquisition is the accretion/dilution model. The underlying purpose of such an analysis is to assess the impact of an acquisition on the acquirer’s expected future earnings per share (EPS).
Ready to Model? Before diving in to the videos below, be sure to download this lesson’s Excel model template: Accretion dilution Excel model template.
M&A Modeling, Part 1
M&A Modeling, Part 2
This is a brief introduction to the concepts and adjustments underlying accretion/dilution analysis and modeling. These are, of course, just a few of the many issues that come into play when building an accretion/dilution analysis. Other adjustments that we did not include include:
- Advanced Purchase Price Allocation concepts including deferred taxes and the treatment of in-process research & development
- Modeling asset sales, 338(h)(10) elections, and stock sales
- Modeling an Advanced Sources & Uses of Funds schedule
- Target debt considerations
- Calendarization and stub year challenges in Excel
Click here to see how accretion/dilution is integrated into M&A pitchbooks prepared by Goldman Sachs and Lazard.