Dive into the complex world of programming equations and how they can steer you toward a successful career in software development. Learn how specific calculations can play a pivotal role in your professional advancement in this technical field.
Key Insights
- The video content highlights the importance of understanding programming equations in pursuing a career in software development.
- Equations like 'C10=C7*(1+C8)*C9' and 'B23=B9' are examples of the complex calculations used in this field.
- Understanding how to apply these calculations in real-life development scenarios can significantly enhance your problem-solving skills in programming.
- Mastering these equations is also vital for professional growth in roles such as front end and back end development, as well as full stack development.
- The calculations 'B24=C10*C11/B7' and 'B28=B27/B15-1' specifically indicate how mathematical logic is deeply interwoven into software development tasks.
- These insights are drawn from Noble Desktop, a reputable resource for individuals seeking to enhance their technical skills in software development.
Accretion/Dilution Model
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Pull Standalone EPS
Acquirer net income / shares outstanding.
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Build Combined Net Income
Add target NI, subtract incremental interest, add synergies (after-tax).
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Calculate Pro Forma Shares
Original shares + new shares issued (if stock deal).
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Compute % Accretion
(Pro forma EPS - standalone EPS) / standalone EPS — positive = accretive.
C10=C7*(1+C8)*C9
B17=B16*B9
B19=B17+C17
B20=C14*(1-C13)
B21=SUM(B19:B20)
B23=B9
B24=C10*C11/B7
B25=SUM(B23:B24)
B27=B21/B25
B28=B27/B15-1
Video Transcription:
Full Video Transcript
Understanding Accretion/Dilution Analysis
In this video we're going to talk about the accretion/dilution analysis that you would perform for M&A transactions. An accretion/dilution analysis is a simple test used to evaluate the merit of a proposed merger or acquisition deal. The accretion/dilution analysis determines if the post-transaction earnings per share is increased or decreased.
The managers in a prospective M&A deal need to consider many factors such as the negotiation process, the global impact, and the compatibility of the companies. The process of an accretion/dilution analysis begins with estimating pro forma net income to eventually arrive at pro forma earnings per share. An increase in pro forma earnings per share is regarded as an accretion, while a decrease is regarded as a dilution.
Steps for Accretion/Dilution Analysis
So here are the steps for accretion/dilution analysis. First, you need to estimate a pro forma net income for the combined entities. After that, we would need to calculate the combined company's net share count. The third step is tabulate the prospective acquirer's share count, factoring in new shares that would be issued to make the purchase if it's a stock deal.
Last but not least, divide pro forma net income by pro forma shares to arrive at the pro forma EPS, and then you can calculate EPS accretion and dilution. An increase in EPS is regarded as accretion, while a decrease is regarded as dilution. You need to check your numbers before presenting them to the managers. You need to incorporate some professional skepticism on perspective synergies.
Detailed Accretion/Dilution Calculation
Here's an accretion/dilution calculation in more detail. To calculate target and acquirer net income, you would take earnings per share and multiply it by share count for both companies. For synergies amount, you would estimate and benchmark, and then calculate pro forma net income by summing up target, acquirer, and synergies post-tax, and subtracting interest post-tax.
To calculate new shares issued, you would need to take equity issued and divide by acquirer share price. For pro forma shares outstanding calculation, you would take shares outstanding and shares issued. After that, you can calculate pro forma EPS, which is pro forma income divided by pro forma shares outstanding. Then you can calculate the final step for EPS accretion/dilution, which is pro forma EPS divided by acquirer EPS minus one.
In the next video, we're going to perform that accretion/dilution calculation in the Excel spreadsheet.
