M&A & Merger Models
Show with numbers how an all-debt deal can be EPS-accretive yet destroy value.
Model answer
An acquirer buys a target earning net income of 80 for 2,000, funded entirely with debt at 4% pre-tax (tax 25%). After-tax interest = 2,000 x 4% x 0.75 = 60. Change in net income = 80 - 60 = +20 with…
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