Here we look at the M&A deal big picture.

There are three time periods in any M&A Model pre deal, deal date, and post deal.

In the pre deal section of the model our focus is going to be on assumptions.

The sources and uses of funds need to be built with debt and equity, switches to include or exclude them, as well as changing the currency if necessary.

Next we need to calculate Goodwill on the target i.e. the difference between the book value of the targets and the acquisition price.

But included in Goodwill, we need to step up or down certain assets and liabilities that need revaluing.

This particularly includes stepping down the existing Goodwill of the target, and then dealing with any deferred tax liabilities that come about because of the step-ups that happen in M&A.

All of that information goes into the sources and uses so we'll help us calculate how much to pay.

But it will also help us with our second time period the deal date.

On the deal date we need to create the opening balance sheet of the NewCo.

This means consolidating or squashing together the acquirer's balance sheet, the targets balance sheet, any deal adjustments such as the new things that have come about in the sources and uses of funds like new debt or new equity and that will get us to the new consolidated balance sheet of the NewCo or new combined company.

The final period has a few things that need doing.

Firstly there are a number of sub-calculations that will need to be done in particular the PP&E, or property plant equipment.

This will require both companies opening balances.

Plus their respective capex's both depreciations, but then also capex on synergies, and depreciation on synergies making for a more interesting PP&E calculation than in a regular three statement model.

Debt fees, as well as interest and tax will also be done here.

From here, we move to the main page the NewCo tab which will forecast out a three statement model for the NewCo.

Finally using inputs from all of the other tabs we do analysis to determine whether the deal will be a likely success or not.

EPS accretion is a classic metric for M&A models, but we also do return on invested capital or ROIC, premium paid versus synergies earned, as well as other smaller items such as checking the credit rating metrics and AVP or analysis at various prices.