M&A & Merger Models
A deal has 100 of run-rate pre-tax cost synergies, but only 50% phase in during year 1, and there are 60 of one-time integration costs in year 1 (tax 25%). How does this shape the accretion story?
Model answer
Year 1: net pre-tax synergy effect = 50 - 60 = -10, which is -7.5 after tax - synergies actually HURT year-1 EPS because integration costs outrun the phase-in. At full run-rate from year 2: +100…
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