How is financial modeling applied to mergers and acquisitions?

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The Answer is Financial modeling helps the analyst understand the underlying relationships among a firm's financial statements, the key determinants of value creation, provides a useful means of assessing alternative options and risks, and identifies how firm value is affected by different economic events. Such models enable an analyst to determine the economic value of a firm as a standalone business (i.e., one for which all known revenues and the costs and assets/liabilities required to produce those revenues are contained on the firm's financial statements). The standalone value of the target constitutes the minimum value of the business and provides the basis for calculating the maximum value of the business (i.e., minimum value plus synergy equals maximum value). As explained in detail in Chapter 14, the amount an acquirer is willing to pay in excess of the standalone value represents some percentage of the difference between the minimum and maximum values

How Is Financial Modeling Applied to Mergers and Acquisitions