Mergers and Acquisition (M&A) Financial Projection Model (Excel XLSX)

An M&A Financial Projection Model is crucial for evaluating the financial viability and potential synergies of a merger or acquisition. It helps assess the combined entity's future financial health, identify cost-saving opportunities, and estimate post-deal cash flows. This model informs strategic decision-making, supports negotiations, and guides integration planning. It also assists in securing financing and gaining approval from stakeholders. Ultimately, an M&A Financial Projection Model is an indispensable tool for mitigating risks, optimizing value creation, and ensuring the success of complex corporate transactions.

PURPOSE OF TOOL
User-friendly financial model to project and analyse the financial outcomes of an M&A transaction. The model enables the user to project the financial performance and position (3-statement financial forecast) over a 5-year period of the stand-alone acquiring business, target business and merged business with the inclusion of any revenue and cost synergy benefits to the latter. The model also enables the user to qualify the intrinsic value of the stand-alone acquirer, target and merged business using the discounted cashflow (DCF) approach.

The model compares these outputs in a dashboard to help the user determine the financial feasibility of the M&A transaction including, amongst others:
•  Synergy benefits vs consideration
•  Revenue, EBITDA and net profit performance of combined entity vs sum of stand-alone entities
•  Intrinsic enterprise and equity values before and after the transaction
•  Gearing, ROE and margin development pre and post transaction
•  Earnings per share pre and post transaction

The model includes 3 scenarios for synergy benefits and pro-forma financial statements for the merged business showing goodwill and impact of sources of funds for consideration.

The model follows good practice financial modelling principles and includes instructions, checks and input validations.

KEY OUTPUTS
The key outputs include:
•  Projected full financial statements (Income Statement, Balance Sheet and Cash flow Statement) across 5 years presented on a yearly basis for stand-alone acquirer, target and merged business
•  Discounted cash flow valuation using the projected cash flow output for acquirer, target and merged business
•  Ratio Analysis based on projected financial statements for acquirer, target and merged business
•  Summarised tables and charts showing:
Key transaction outputs including, offer/market and intrinsic value per share, total synergy benefits, consideration and transaction costs
Charts showing breakdown of synergy benefits and sources of funds
Key performance metrics and ratio comparison between acquirer, target and merged entity in table and chart format including revenue growth, EBITDA, net profit, margin, ROE, EPS and debt to equity ratios)
Key valuation comparison between acquirer, target and merged entity in table and chart format

KEY INPUTS
Inputs are split into Setup inputs, Acquirer entity inputs, target entity inputs and merged entity inputs.

Setup Inputs:
•  Names of transaction, acquiring entity and target entity
•  Currency;
•  Transaction close period;
•  Latest share prices and outstand shares;
•  Offer premium and consideration type;
•  Transaction costs;
•  Naming of synergy scenarios.

Acquiring and Target Entity Projection Inputs:
•  Latest P&L and balance sheet actuals;
•  Forecast revenue;
•  Forecast cost of sales;
•  Forecast operating expenses including depreciation;
•  Fixed asset additions;
•  Borrowing additions/repayments;
•  Dividend distributions;
•  Tax rate and interest rates;
•  Debtor and creditor days;
•  Inventory percentage of cost of sales;
•  Discount rate and terminal growth rate.

Merged Entity Inputs:
•  Synergy benefits (revenue increases, cost reductions) for each scenario
•  Tax rate and interest rates;
•  Debtor and creditor days;
•  Inventory percentage of cost of sales;
•  Discount rate and terminal growth rate.
•  Borrowing additions/repayments;
•  Dividend distributions;
•  Pro-forma opening balance sheet adjustments.

MODEL STRUCTURE
The model comprises of 10 tabs split into input ('i_'), calculation ('c_'), output ('o_') and system tabs. The tabs to be populated by the user are the input tabs which include ‘i_Setup' for model and transaction general assumptions and ‘i_Acquirer', ‘i_Target' and ‘i_Merged' for specific projection assumptions relating to the stand-alone entity and combined entity. The calculation tabs uses the user-defined inputs to calculate and produce the projection outputs which are presented in the calculation tabs and ‘o_Dashboard' tab.

System tabs include:
•  A 'Front Sheet' containing a disclaimer, instructions and contents;
•  A checks dashboard containing a summary of checks by tab.

KEY FEATURES
Other key features of this model include the following:
•  The model follows good practice financial modelling guidelines and includes instructions, checks and input validations to help ensure input fields are populated accurately;
•  The model enables the user to prepare projections for the acquirer, target and merged entity across a 5-year timeline with an additional 3 years of actuals in the case of the acquirer and target stand-alone businesses.
•  The model includes the possibility to model synergy benefits across 3 scenarios with a drop down in the dashboard tab to change scenario.
•  The model is not password protected and can be modified as required following download;
•  The model is reviewed using specialised model audit software to help reduce risk of formula inconsistencies;
•  Apart from projecting revenue and costs the model includes the possibility to model receivables and payables, inventory, fixed assets, borrowings, dividends and corporate tax;
•  Business names, currency and transaction close date are fully customisable;
•  The model included an integrated discounted cash flow valuation for acquirer, target and merged business using the projected cash flow outputs;
•  The model includes a checks dashboard which summarises all the checks included in the various tabs making it easier to identify any errors.