Client Requirements -
M&A Modeling

As stated by the client, the requirement was to develop a merger model for them regarding the merger and acquisition of two Southeast Asian public sector banks. In general, the requirement included the following four tasks:

• Projection of financial statements for both the banks
• Multiple scenario assumptions for the merger
• Valuation of the target bank
• Presentation with the deal analysis

Among many others, Research Optimus got the opportunity to work on this project because of its extensive prior exposure to the financial domain, highly skilled analysts, and strong SLA adherence.

Usual Project Challenges

ROP’s research and analysis team faced the most usual project challenge around the delivery timeline:

• A tight deadline of 7 days.
• Additional change requests as well as inputs to be accommodated within the same 7-day delivery time.

ROP’s Financial Modeling Solution

ROP factored in the short deadline and specific client requirements to develop a customized process flow for the project:

• ROP assigned one experienced senior analyst as the dedicated resource while a project manager was also closely monitoring the project.
• The analyst began with the collection of financials, and the projection of the three financial statements of the two banking organizations.
• After projecting the financial statements, the priority was to do a valuation of the target bank, which required three distinctive approaches: Dividend Discount Model (DDM), Trading Comparable, and Precedent Transactions. The analyst arrived at the valuation of the target after assigning weights to each of the three approaches. During this task, our team was in constant communication with the client for their inputs and insight.
• After the valuation of the target, a merger model was created according to different scenario assumptions, such as:
  1. Price per share of the target, and corresponding purchase consideration.
  2. Option on how the deal will be financed - Stock, Debt, and Cash.
  3. Synergies - interest income, cost of synergy, and synergies of expenses.
  4. Financing fee.
• Following this, we proceeded to the following:
  1. Information collection on sources and usage of funds.
  2. Goodwill calculation.
  3. Post-merger income statement, balance sheet, and cash flow statement.
  4. Accretion/Dilution Analysis.
  5. Sensitivity analysis of Accretion/Dilution sensitivities, inclusive of both offer price and financing option.
• After a discussion with the client, the merger model was finalized. A business presentation of both the target bank and the acquirer bank was provided to the client, along with ROP’s detailed analysis of the merger and acquisition scenarios.

Exceptional Steps Taken by
Our Financial Analysts

ROP took extra measures to deliver the most accurate M&A model within the agreed SLA period:

• As the project was related to the Banking industry, the team at ROP sought expert opinion from the industry experts from other in-house teams.

Project Benefits Apart from
Delivering Accurate M&A Model

Along with the good words from a satisfied client for an in-time delivery, transparent process, and data privacy assurance, ROP documented its positive organizational approach towards such time-critical high-value projects.

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