Mergers, Acquisitions, Divestitures, and Other Restructurings, + Website

Appendix 1

Model Quick Steps

For a full-scale merger model, after completing core assumptions (purchase price, sources, and uses), the next steps should serve as a guide for modeling the rest of the model:

1. Income Statement
   1. Consolidate revenue.
   2. Consolidate all expenses.
      1. Transaction Adjustment: Estimate synergies.
      2. Leave “Depreciation” empty (to come from depreciation schedule, IV.1.a).
      3. Transaction Adjustment: Amortization of identifiable intangible assets—leave empty, to be estimated later.
      4. Leave “Interest Expense” and “Interest Income” empty (to come from debt schedule, VII.7 and VII.8).
   3. Build to Net Income.
   4. Calculate pro-forma shares.
      1. Pull in acquirer share count.
      2. Transaction adjustment: estimate new shares raised.
   5. Calculate EPS accretion/dilution.
2. Cash Flow
   1. Cash Flow from Operating activities.
      1. Pull in “Net Income before Distributions” from income statement.
      2. Link “Depreciation” from income statement (I.2.b).
      3. Link “Amortization of identifiable intangible assets” from income statement (I.2.c).
      4. Consolidate “other” cash flow from operating activity line items.
      5. Leave “Changes in Operating Working Capital” empty (to come from operating working capital schedule, V.1.a and V.2.a).
   2. Cash flow from investing activities.
      1. Consolidate CAPEX.
      2. Consolidate “other” items (typically from acquirer only).
   3. Cash flow from financing activities.
      1. Leave “Borrowings (Repayments)” empty (to come from debt schedule, VII.9).
      2. Consolidate “other” items (typically from acquirer only).
   4. Sum Total Cash ...