A well-thought-out analysis of an upcoming merger could be critical to the success of an acquisition. Custom B2B market research is necessary to provide accurate and reliable market insights that can help to identify the major gaps in due diligence.

Mergers could drastically alter a company’s financial position, operational structure and strategic direction. They can also present opportunities to save money, grow and synergies. Companies pursuing M&A should be prepared to tackle the issues that mergers could bring risks to integration, for example, and clashing cultures.

The most important aspect of making preparations for M&As is to perform an accretion/dilution study. This is the process of estimating pro forma net income in order to arrive at pro-forma earnings per share (EPS). A rise in EPS is considered to be accretive, while the decrease in EPS is regarded as dilutive. Wall Street is often against any deal that dilutes, because it increases the risk associated with the acquisition.

Another crucial aspect to consider is whether there exists evidence of coordinated market effects or if the proposed merger could cause coordinated interactions. Coordination can be achieved through coordinating pricing or allocating customers. Generally, for coordinated interaction to exist, there must be a clear understanding of the types of customers served by competitors and the reasons why prices and capacity are changing. It can be difficult to find enough evidence of coordination in the market at hand, but an analysis for a potential merger can assess whether the proposed deal will lead to coordinated interactions.

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