From the course: Mergers & Acquisitions
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Model the valuation
From the course: Mergers & Acquisitions
Model the valuation
- Financial models provide insight into what the future financial performance of the combined organization might look like. Model the full financial impacts of the deal, including the impact on revenue, cost, your balance sheet, and other key drivers of financial performance. Gather data from publicly available sources as well as data provided by the acquisition target. Make sure you discount the accuracy of that target provided data, especially their forward looking assumptions. Companies that are looking to sell might paint a rosier picture because it helps 'em get a better price for their business. Build a pro forma financial model for a reasonable timeframe. I encourage people to use a 10-year timeframe for any acquisition they're doing. Highlight your key assumptions. And identify which ones drive the greatest swings in your valuation. You can use basic sensitivity analysis to determine which variables drive the valuation. Those are the variables to do deep diligence on. Make…
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