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Buy-Side M&A 231 c. Calculate pro forma 2013 combined diluted EPS d. Calculate BuyerCo 2014 standalone diluted EPS e. Calculate 2015 accretion/(dilution) on a dollar amount basis f. Calculate 2016 accretion/(dilution) on a percentage basis g. Calculate 2017 additional pre-tax synergies to breakeven 6) If the pro forma EPS of two combined companies is higher than the EPS of the acquirer on a standalone basis, the transaction is said to be A. Accretive B. Dilutive C. Breakeven D. Consensus 7) If the pro forma EPS of two combined companies is lower than the standalone EPS of the acquirer, the transaction is said to be A. Accretive B. Dilutive C. Breakeven D. Consensus5) Using the calculations performed in the previous questions, as well as the assumptions below, complete the accretion/(dilution) analysis for BuyerCo Assumptions BuyerCo Marginal Tax Rate 38.0% Tangible Asset Write-Up Depreciation Period 15 years Intangible Asset Write-Up Amortization Period 15 years ($ in millions, except per share data) Accretion / (Dilution) Analysis - 50. Stock / 50'- Cash Consideration Projection Period Pro forma 3 2012 2013 2014 2015 2016 2017 BuyerCo EBIT $1,317.4 $1,409.6 $1,494.2 $1,568.9 $1,631.6 $1,680.6 ValueCo EBIT 518.0 556.9 590.3 619.8 644.6 563.9 Synergies 100.0 100.0 100.0 100.0 100.0 100.0 Pro Forma Combined EBIT (pre-transaction) $1,935.4 $2,066.4 $2,184.4 $2,288.7 $2,376.2 $2,444.5 Depreciation from Write-Up Amortization from Write-Up A) Pro Forma Combined EBIT Standalone Net Interest Expense 142.4 140.6 137.0 133.0 128.9 124.5 Incremental Net Interest Expense 230.9 206.4 158.0 132.8 130.8 128.6 Earnings Before Taxes Income Tax Expense Pro Forma Combined Net Income 6945.8 $1,043.3 $1,148.7 $1,231.4 $1,289.5 $1,336.0 BuyerCo Standalone Net Income $728.5 $786.8 $841.5 $890.2 $931.7 $964.8 Standalone Fully Diluted Shares Outstanding 140.0 140.0 140.0 140.0 140.0 140.0 Net New Shares Issued in Transaction 33.6 33.6 33.6 33.6 33.6 33.6 Pro Forma Fully Diluted Shares Outstanding 173.6 173.6 173.6 173.6 173.6 173.6 Pro Forma Combined Diluted EPS BuyerCo Standalone Diluted EPS D) Accretion / (Dilution) - $ Accretion / (Dilution) -% Accretive / Dilutive Included Pre-Tax Synergies Additional Pre-Tax Synergies to Breakeven Required Synergies to Breakeven / (Cushion) a. Calculate pro forma 2012 depreciation on the tangible asset write-up. Assume this amount is held constant throughout the projection period b. Calculate pro forma 2012 amortization on the intangible asset write-up. Assume this amount is held constant throughout the projection period
