Mergers & Acquisitions

We break down the fundamentals of Mergers & Acquisitions (M&A) from the perspective of a strategic buyer. 

We set the stage for our M&A analysis by breaking down the evolving deal drama between GoJo and Waystar in Succession Seasons 3 and 4. Using this storyline, we clarify key terms like merger vs. acquisition, merger of equals, and what happens when the target becomes the buyer. This narrative gives us the context we’ll need to think like GoJo’s bankers as we move into modeling post-deal EPS, debt capacity, and ownership dilution.

We define accretion and dilution, and discuss how companies use pro forma EPS to determine if a transaction creates shareholder value. We also explore WHY EPS is the main financial projection public companies focus on and how it ties directly to stock price via multiples like P/E and PEG. This sets the stage for building our M&A model and calculating the all-important post-deal EPS.

We walk through how to calculate pro forma EPS in an M&A deal and explore the key drivers that impact it—from financing decisions (cash vs. stock), to synergies, to accounting adjustments like D&A. You’ll see how bankers weigh tradeoffs between income statement accretion, balance sheet constraints, and shareholder dilution to structure the optimal deal.

We zoom out to explore the full cast of players involved in a merger or acquisition—from buy-side and sell-side bankers running financial models and fairness opinions, to consultants, accountants, and lawyers shaping deal structure, tax outcomes, and synergies. You’ll learn how these teams collaborate behind the scenes to inform pricing, financing, and negotiation strategy.

We kick off our M&A model by walking through the key inputs needed to run a bottoms-up model. You’ll learn where to find real-world data—like share prices, share counts, projected earnings, and balance sheet items—and how to adjust for complexities like cross-border FX and break down the various types of shares (actual vs. average, basic vs. diluted). This sets the groundwork for building our M&A model pen and paper before we later build it in Excel.

We walk through the transaction assumptions and build out the Uses side of the Sources & Uses table, calculating how much GoJo needs to fund the acquisition of Waystar.

We break down the Sources side of the Sources & Uses table, showing how GoJo finances their acquisition of Waystar. This sets up the full funding picture and prepares us to explore how that consideration mix was determined.

We evaluate the optimal mix of cash and stock in an M&A deal by using relative P/E multiples and the concept of the P/E of cash. You’ll learn quick, back-of-the-envelope shortcuts to assess whether a deal is accretive or dilutive—without building a full model—while also understanding the tradeoffs between accretion, balance sheet impact, and shareholder dilution.

We explore the balance sheet constraints that limit how much cash an acquirer like GoJo can use in a deal. We walk through how to calculate pro forma leverage and explain why companies care deeply about maintaining investment-grade credit ratings.