Build this section just as you do with any other model, and repeat it twice: once for the target and once for the acquirer. This process is known as building a 3-statement model and requires linking the income statement, balance sheet, and cash flow statement. In order to forecast, an analyst will make assumptions about revenue growth, margins, fixed costs, variable costs, capital structure, capital expenditures, and all other accounts on the company’s financial statements. Making projections in a merger model is the same as in a regular DCF model or any other type of financial model. Screenshot from CFI’s M&A Modeling Course.
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