Merger consequences analysis is often referred to as an affordability analysis because it is used to determine what an acquirer could pay for a possible target. In this tutorial, you will learn how to perform the mechanics of a merger consequences analysis. This includes determining the proposed transaction’s impact on EPS (accretion/dilution) and credit statistics.

Objectives
On completion you will be able to:

• recognize the importance of affordability analysis by evaluating the possible accretion/dilution and the impact on the acquirer’s credit rating
• describe the fundamentals of purchase accounting, especially the creation of goodwill
• calculate the EPS impact of a transaction and the possible impact on credit statistics
• evaluate whether a transaction is accretive or dilutive by comparing the acquirer’s price/earnings (P/E) multiple to the offer P/E multiple
• outline other common complexities and considerations that arise in merger consequences analysis