Determine the post-merger eps and post-mergershare price, Financial Management

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Post-merger EPS and post-mergershare price

An estimated post-merger EPS can be calculated by:

(Combined earnings) / total shares after merger

An estimated post-merger share price can also be calculated depending on information given:

1 Post merger EPS x parent's PE ratio

This is assuming that parent (predator) company can maintain its price earning multiple on combined entity.

2 Post merger NPV / number of shares after the merger

Post-merger share price and post-merger EPS can be compared against share price and EPS for every entity before the merger to see if both sets of shareholders will agree to the sale.

When asked how the merger will affect both sets of shareholders in financial terms, the following must be calculated:

  • Post-merger share price
  • Post-merger EPS
  • Split of post-merger gains

Other financial analysis could also be undertaken (i.e. Ratio analysis). It's also important to then discuss non-financialfactors (i.e. post-merger integration).

 


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