M&A & Deal Analysis
Deal analysis is where several accounting and financing conventions have to hold at once. Purchase accounting, the financing waterfall, conformed policies, and the share-count bridge each have a correct treatment and a model that gets four of five right still produces a number a partner cannot sign. The failures here are structural: synthesis errors across sections, not slips inside one.
Purchase price allocation
MechanismA taxable step-up that is not deductible creates a deferred tax liability equal to the step-up times the tax rate, which in turn increases goodwill.
ConsequenceUnderstates goodwill and overstates net identifiable assets — the entire balance-sheet plug is wrong.
MechanismIdentifiable intangibles — customer relationships, technology, trade names — must be recognized at fair value before the residual becomes goodwill.
ConsequenceMisstates amortization and the goodwill subject to impairment testing.
LBO construction
MechanismSources and uses must fund advisory and financing fees, original-issue discount, and a minimum operating cash balance at close.
ConsequenceUnderstates required equity and overstates the return.
MechanismFinancing-fee amortization is a non-cash expense added back in the cash sweep; treating it as cash drag understates debt paydown.
ConsequenceDistorts the deleveraging path and exit equity.
Accretion / dilution
MechanismAccretion is meaningful only once the target is restated to the acquirer's policies and new intangible amortization and financing cost are included.
ConsequenceA deal that reads accretive can be dilutive after conforming adjustments.
MechanismCash used loses its interest income and new debt carries interest — both hit pro forma EPS.
ConsequenceOverstates accretion.
Merger consideration & structure
MechanismA fixed exchange ratio floats with the acquirer's share price; the dollar value to the target moves until close.
ConsequenceMisstates the premium and the collar economics.
MechanismCollars convert a fixed-value region into a fixed-ratio region — or the reverse — beyond defined price bounds.
ConsequenceMisprices the consideration in the tails.
Synergies & pro forma
MechanismSynergies carry one-time integration costs and a realization ramp, both of which must be modeled before crediting steady-state run-rate.
ConsequenceOverstates deal value and IRR.
MechanismSynergy credit must be incremental to each standalone plan.
ConsequenceInflates pro forma growth.
The full bank contains additional items not published here. The taxonomy is a living artifact, derived from practice — versioned, dated, and never claimed to be exhaustive.