What role does a merger model play in deal negotiations?
- It confirms the accounting method (purchase vs. pooling) that will be applied
- It fixes the target's post-close share price, since the swap ratio is set to make both stocks trade at par
- It tests accretion/dilution and the max price the acquirer can pay, informing the offer and structure
- It produces the combined company's filed tax return for the year of close
- It substitutes for legal and commercial due diligence on the target
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