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Spreading Investment Banking Comps: Calculating Fully Diluted Market Capitalization

We will explain the most important part of spreading comps for investment bankers in this post. The brunt of conducting comparable companies analysis is to calculate the appropriate enterprise value, which will have certain components which are "live" and certain components that are the latest historical financial statement data. So to

How to Answer “What Two Companies Do You Think Should Merge?”

This is an excellent investment banking interview question which shows that the interviewee thinks about corporate finance applications outside of theory. A lot of candidates have the technical interview questions rehearsed and have great answers about: Why investment banking? Can you work the hours? Are you really passionate about finance? And then after convincing you

A Comparison of Spin-Outs versus Carve-Out IPOs: Part I

Spin-Out of Non-Core Assets For many corporates, there will be talk about non-core assets and their role under the broader company umbrella. These non-core assets may be divisions that do not fit into the business thesis that investors are looking for. As a very simple example, if a chain of coffee shops

Dividend Policy and Return of Capital

Corporations often ask investment bankers - "What should we do with our dividend?" Theoretically, dividend policy does not change the value of the firm – implementing a dividend or adding to a dividend should not change the share price1. However outside of academia, it does for reasons including: Tax on Dividends versus

Accretion/Dilution Analysis – Part IV: Synergies and Source of Funds for M&A

Accretion/Dilution for M&A with Mixed Funding Sources Larger, transformative acquisitions tend to require a mix of debt and equity financing unless the acquirer had an underleveraged balance sheet beforehand and substantial cash reserves. As such, finding the breakeven for accretion requires additional calculation. The appropriate cost of acquisition is accordingly the blended

Accretion/Dilution Analysis – Part III: Using Debt for Acquisitions

The last two parts of our Accretion/Dilution series focused on all-stock transactions, which are excellent in forming a theoretical understanding of the dynamics at play. However, acquisitions often have a cash component to the consideration, either in-whole or in-part. How this cash is funded is usually through debt, although excess balance

Accretion/Dilution Analysis – Part I: EPS, Earnings Yield and All-Stock Transactions

Accretion/Dilution is an important concept in corporate finance which is associated with mergers & acquisitions (is a transaction accretive or dilutive post-merger) – however, accretion/dilution analysis is conducted whenever an analyst looks at pro-forma earnings (or cash flow for energy and mining companies) after the evaluation of various corporate actions