
Standardizing a merger model sounds easy until one template has to fit every deal
Everyone says merger model templates should be standardized.
In theory, yes. Everyone wants to save time and stop every analyst from doing the same thing.
But one-page deal summaries present a problem.
There is barely any space on a one-page deal summary. Any simplification buries the assumptions that matter most to the deal.
The layout should include elements like valuation, purchase price, deal structure, assumptions, a headline metric, and a sensitivity analysis.
But the economics will vary from deal to deal. For instance, a cash deal will feature different metrics to a stock deal. A sponsor will care for different metrics than a strategic buyer. A public company will have different metrics than a private target company.
Each of these features distinct economic elements that will not meet the other templates’ requirements.
Despite the variety of deals, there are certain aspects to a one-page merger model that will remain the same.
For instance, a one-page model should include the answers to questions that will remain the same:
What are we paying?
How are we paying?
What has to be true for this deal to work?
What breaks the deal?
The answers to these questions will take on different meanings based on the type of deal.
But the fact that they will remain the same is not a flaw in the template. It is the point of the template.