In order to determine if a merger makes financial sense, companies must do a thorough study. This involves a discounted cashflow (DCF) as well as comparing and contrast trading comparables, as well as precedent transactions. It also involves calculating prospective synergies that will be realized when the deal is concluded. This is a difficult step that requires the expertise of an analyst from the financial sector with experience in M&A modelling.

A dilution/accretion analysis is crucial to determine the profitability. This analysis determines if the merger will enhance or decrease the earnings per share (EPS), post-transaction, of the acquiring firm. It begins by estimating pro-forma net income in order to calculate the pro-forma Earnings Per Share (EPS). An increase is regarded as positive, whereas an increase is considered dilutive.

The analysis must also consider the impact of the merger on the nature of the competition between the merging firms and the market. This includes the possibility of anti-competitive effects, like offers made to the merged company or a greater power concentration on the market. While there is some research that has been conducted on this issue and the need for more research, it is necessary to identify quantitative analyses suitable to evaluate the competitive impact of horizontal mergers. Additionally, the research should look at what other obstacles to coordination already exist in the market and how a merger could alter these.