Financial Modeling Self Study Program

Welcome to IBankingFAQ

I am excited to say that I’ve finished work on my book, How to Be an Investment Banker: Recruiting, Interviewing, and Landing the Job + Website (Wiley Finance) which will be released on April 1, 2013. It was a lot of work but I hope many of you find it useful for the investment banking recruiting process. Basically, the book is an extension of this site covering in greater detail information about investment banking and lifestyle, recruiting and interviewing and the technical stuff that you need to know, including an overview of accounting, finance, financial statement analysis, valuation, modeling, M&A and LBOs.

I’ve also recently launched a website called igokids. This has nothing to do with finance or investment banking but it is my full-time gig so feel free to check it out. igokids is local search and discovery site for everything kid related in New York City (in a nutshell, “Yelp for parents”). I’m proud to say that I developed it from scratch myself, being a totally self-taught programmer. See all the exit opportunities that investment banking can lead to?

I also want to remind you about my financial modeling self study program, which costs only $49. You can learn how to build a financial model in the comfort of your own home or office. Knowing how to build an integrated cash flow model will definitely help you in your interviews plus it is a great way to prep for those dreaded technical interview questions. Click to view more information about the financial modeling self study program.

As always, I look forward to your comments/suggestions/questions and emails (andrew [at] ibankingfaq.com).

How to be an Investment Banker

Random FAQ: Walk me through an accretion/dilution analysis…

The purpose of an accretion/dilution analysis (sometimes also referred to as a quick-and-dirty merger analysis) is to project the impact of an acquisition to the acquiror’s Earnings Per Share (EPS) and compare how the new EPS (“proforma EPS”) compares to what the company’s EPS would have been had it not executed the transaction.

In order to do the accretion/dilution analysis, we need to project the combined company’s net income (“proforma net income”) and the combined company’s new share count.  The proforma net income will be the sum of the buyer’s and target’s projected net income plus/minus certain transaction adjustments.  Such adjustments to proforma net income (on a post-tax basis) include synergies (positive or negative), increased interest expense (if debt is used to finance the purchase), decreased interest income (if cash is used to finance the purchase) and any new intangible asset amortization resulting from the transaction.

The proforma share count reflects the acquiror’s share count plus the number of shares to be created and used to finance the purchase (in a stock deal).  Dividing proforma net income by proforma shares gives us proforma EPS which we can then compare to the acquiror’s original EPS to see if the transaction results in an increase to EPS (accretion) or a decline in EPS (dilution).  Note also that we typically will perform this analysis using 1-year and 2-year projected net income and also sometimes last twelve months (LTM) proforma net income.

View more frequently asked questions about: Mergers and Acquisitions.