M&A & Merger Models
A combined company eliminates $100m of duplicate SG&A but expects $20m of revenue dis-synergy from customer overlap. At a 25% tax rate, what is the net after-tax synergy to EBIT? State assumptions.
Model answer
Cost synergy adds $100m to EBIT. The revenue dis-synergy reduces sales by $20m; assuming for illustration it falls at, say, a 40% incremental EBIT margin, that's a $8m EBIT hit (20 × 0.40). Net EBIT…
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