# M&A Model Example Build an M&A model for acquisition analysis with deal structure, purchase accounting, pro forma earnings, and accretion dilution outputs. - Canonical: https://finamodel.com/examples/ma-model - Excel download: https://finamodel.com/templates/ma.xlsx - Category: Corporate Finance - Model type: Valuation - Difficulty: Intermediate - Audiences: Bankers & advisors, Investors & analysts, Investment Bankers, M&A Advisors, Corporate Development, Investors - Tags: ma, valuation, dcf, synergies, deal-structure ## Overview An M&A Modeling & Valuation template provides comprehensive target valuation using three methods: standalone DCF (discounted cash flow with free cash flow projections), trading comparables (public company EV/EBITDA multiples), and precedent transactions (prior M&A deal multiples). The model builds a forward 5-year P&L for the target, computes unlevered free cash flow, applies a WACC (typically 7-10% for mid-market industrial targets), and derives enterprise value. Comparable company analysis extracts median EV/EBITDA, EV/Revenue, and P/E multiples from peer groups; precedent transactions adjust for deal timing and buyer-specific synergies. The final valuation range (football field) anchors buyer offer strategy and integration planning. Once valuation is established, the Deal_Structure sheet models pro-forma financing: all-cash, stock, or mixed consideration. The Synergies_Analysis quantifies cost synergies (headcount reduction, procurement savings, overhead elimination), revenue synergies (cross-sell, geographic expansion), and integration costs (severance, system migration). Pro-forma accretion/dilution is computed: if the buyer's existing EPS and the deal's pro-forma EPS diverge, the transaction is accretive (boosts EPS) or dilutive (reduces EPS) on a per-share basis. The Buyer_Returns sheet models levered cash returns to the buyer - equity IRR and cash-on-cash multiple - factoring in deal leverage, exit multiple (typically flat to 50-100 bps compression), and hold period. Acquisition price sensitivities are crucial: buyer's walks if cost of capital or synergies don't support deal returns. This model is essential for M&A bankers, corporate development teams, and private equity sponsors evaluating acquisitions. Typical target valuation ranges from 6-12× EBITDA depending on industry and growth profile; buyer decision thresholds often require >15% levered IRR or >2.0× equity multiple. The three-method approach provides defensible negotiation fodder for both buyer and seller. ## What's included - Transaction summary and purchase price build - Purchase price allocation and synergies - Standalone and pro forma income statements - Accretion dilution outputs - Credit metrics and scenario testing - Standalone DCF valuation with revenue, EBITDA, and capex projections - Trading comparables analysis with EV/EBITDA, P/E, and growth multiples - Precedent transaction analysis with disclosed and implied multiples - Deal structure scenarios (all-cash, stock, mixed) - Synergy identification and integration cost estimates - Pro forma accretion/dilution and post-close earnings impact ## M&A Model: How the Acquisition Analysis Template Works Evaluating an acquisition requires connecting deal structure, purchase accounting and financing into one coherent view. This m&a model template delivers exactly that: a five-year pro-forma analysis that links acquirer and target, produces accretion/dilution per year, and surfaces leverage, coverage and buyer returns. The public download is a values-only preview of the underlying model logic. ### Operating drivers and deal structure assumptions Every figure traces back to the Assumptions tab, which holds acquirer, target, transaction, financing, synergy, integration, purchase accounting, operating, and sensitivity-range inputs in one place. - Because the whole model reads from these named inputs, changing the offer premium, cost synergy estimate, cash-versus-stock mix, or target net debt should flow through the transaction summary, the debt schedule and the income statement consistently. - The transaction summary then builds Sources & Uses, which must tie, and calculates the purchase price allocation including goodwill, implied multiples and the exchange ratio for stock consideration. ### How the acquisition flows through the financial statements The pro-forma income statement combines acquirer and target results with synergies and integration costs, moving from combined EBITDA through purchase-accounting amortisation, interest, transaction and financing fees, foregone cash interest, tax and net income to EPS. - Interest is sourced from the debt schedule opening balances rather than parallel formulas, so edits to the debt schedule propagate correctly. - The balance sheet builds Day-1 acquisition adjustments and rolls forward five years with a balance check in each column, while the cash flow statement links opening cash from the Day-1 balance sheet and returns closing cash to it. - A standalone income statement provides the acquirer-only counterfactual for comparison. ### Accretion, dilution and credit outputs The Accretion_Dilution tab compares pro-forma EPS with standalone EPS and decomposes the difference through a net income bridge with an explicit tie check, plus a per-share bridge that includes a share dilution drag line and its own tie check. - The Credit_Metrics tab models acquisition and existing debt from opening balance through amortisation, balloon and closing balance, driving leverage and interest coverage ratios. - It also tracks pro-forma equity via a market-cap proxy and a separate book equity rollforward. - These outputs show how deal financing and purchase accounting affect reported earnings and credit quality over the projection horizon. ### Buyer returns, sensitivity and validation Buyer_Returns calculates equity invested at close, dividends over years one to five, and terminal equity value from an exit EBITDA multiple applied to pro-forma EBITDA less net debt plus cash, scaled by ownership share. It produces IRR and MOIC alongside a break-even cost-synergy sweep. - The Sensitivity tab provides two-way grids on premium versus cost synergies and premium versus cash mix, anchored to base-case inputs with the base highlighted and tied to year-three accretion. A consolidated Checks panel tests sources and uses, the independent PPA identity, bridge ties, balance sheet balance, debt continuity, sensitivity tie-out, integration headroom and buyer return bounds, flagging PASS or FAIL. - The download is a values-only preview. ## Built for live deals Use this structure when analysing the impact of acquisitions on earnings, leverage, and valuation. ## Clear pro forma view Move from transaction assumptions to pro forma outputs in one coherent model. ## Useful for corp dev and bankers Supports internal strategy teams as well as external advisory workflows. ## Built for live deals Use this structure when analysing the impact of acquisitions on earnings, leverage, and valuation. ## Clear pro forma view Move from transaction assumptions to pro forma outputs in one coherent model. ## Useful for corp dev and bankers Supports internal strategy teams as well as external advisory workflows. ## Workbook structure ### Deal Assumptions This sheet captures purchase price, financing mix, synergies, and key transaction assumptions before the combination is built. - Purchase price and structure inputs - Financing assumptions - Synergy assumptions - Core deal terms that drive the model ### Purchase Accounting The purchase accounting sheet bridges the deal price into acquired assets, liabilities, goodwill, and other transaction adjustments. - Purchase price allocation logic - Identifiable asset and liability adjustments - Goodwill build - Accounting bridge into the combined company ### Pro Forma Earnings This sheet combines the buyer and target into one operating view so accretion and leverage impacts can be assessed. - Standalone plus target combination - Synergy impact on earnings - Pro forma operating performance - Combined-company view after the deal ### Accretion & Output The final output sheet shows whether the deal is accretive or dilutive and summarises the key metrics decision-makers care about. - Accretion dilution outputs - Credit and leverage metrics - Scenario sensitivity - Clear transaction impact summary ### Deal Assumptions This sheet captures purchase price, financing mix, synergies, and key transaction assumptions before the combination is built. - Purchase price and structure inputs - Financing assumptions - Synergy assumptions - Core deal terms that drive the model ### Purchase Accounting The purchase accounting sheet bridges the deal price into acquired assets, liabilities, goodwill, and other transaction adjustments. - Purchase price allocation logic - Identifiable asset and liability adjustments - Goodwill build - Accounting bridge into the combined company ### Pro Forma Earnings This sheet combines the buyer and target into one operating view so accretion and leverage impacts can be assessed. - Standalone plus target combination - Synergy impact on earnings - Pro forma operating performance - Combined-company view after the deal ### Accretion & Output The final output sheet shows whether the deal is accretive or dilutive and summarises the key metrics decision-makers care about. - Accretion dilution outputs - Credit and leverage metrics - Scenario sensitivity - Clear transaction impact summary ## Features - **Three valuation methods:** Compare DCF, trading comparables, and precedent transactions to triangulate a fair value range. - **Synergy quantification:** Model revenue synergies, cost savings, and working capital benefits, then stress test to conservative estimates. - **Buyer returns analysis:** Calculate pro forma ownership, earnings accretion or dilution per share, and payback period on acquisition investment. ## Use cases - **Bid price fairness analysis:** Use valuation range to assess whether a proposed bid price is fair to sellers and accretive to buyers. - **Deal structure optimization:** Model all-cash vs. stock vs. earnout structures and their impact on closing mechanics and buyer returns. - **Investment committee support:** Present valuation summary and deal case to secure board or investor approval for the transaction. ## Frequently asked questions ### What is an M&A model? An M&A model analyses how a transaction affects a buyer through financing, synergies, purchase accounting, and pro forma earnings. ### What is accretion dilution? It tests whether a transaction increases or decreases the buyer's earnings per share after financing and synergies are considered. ## Related templates - [Leveraged Buyout Model](https://finamodel.com/templates/lbo-model) - [Sum of Parts Valuation](https://finamodel.com/templates/sum-of-parts-model) - [Comparable Companies Analysis](https://finamodel.com/templates/comparable-company-analysis)