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When companies are in the process of evaluating potential mergers and acquisitions, a thorough analysis is required to determine whether the merger is in sense financially. This includes analyzing an estimated cash flow (DCF) model for each business, comparing and contrast with trading comparables and prior transactions. It also involves calculating future synergies which will be realized once the deal is completed. This is a complex process that requires the expertise of an analyst in finance who has experience in M&A modeling.

An analysis of dilution/accretion is essential for determining the profitability. This analysis determines if the merger will increase or decrease the post-transaction earnings per share (EPS) of the company that is acquiring. It begins by estimating pro-forma net income in order to calculate the pro-forma earnings per Share (EPS). An increase in earnings is considered a positive while a decrease would be considered a negative.

The analysis should also take into consideration the effects of the merger on the nature of the competition between merging companies and the market. This could result in negative effects for competition, such as offering for the merged company and an increased concentration of power on the market. While there is some research in this area however, more research is required to determine the right quantitative analysis to assess the competitive effects of horizontal mergers. The research should also look at other barriers to coordination which are currently on the market, and how a merger can alter this.