Buyer Proposal Evaluation: Currency, Accretion/Dilution, Synergies

What this video covers

• How the seller's banker uses six lenses (ability to pay, currency strength, accretion/dilution, synergies, social issues, regulatory sensitivity) to compare competing bids
• Why strong buyer currency matters: liquid float, premium multiple, low volatility, and what weak currency forces at the negotiating table
• The mechanical consequence of weak currency: higher exchange ratio demanded, more shares issued, greater dilution risk, and why sellers may insist on cash instead
• How to calculate pro forma earnings per share (EPS): combined net income plus after-tax synergies, less after-tax interest expense or foregone interest income, less incremental depreciation and amortization (D&A), divided by pro forma shares outstanding
• The cash deal accretion heuristic: target earnings yield greater than after-tax cost of financing, and why this matters for rapid evaluation
• The stock deal accretion trap: acquirer price/earnings (P/E) greater than target P/E only works with zero premium and zero synergies; a control premium can flip accretive to dilutive
• Why social issues (board seats, CEO role, headquarters, employee benefits, severance) can be absolute deal-breakers even when the financial math is flawless