Financial factors to be considered in an Acquisition

The financial factors you consider to be important for an acquisition candidate might include the following:

    Share Price     Asset/Liability Mix
    Earnings     Off-Balance-Sheet Risks
    Financial Stability and Consistency     Profitability
    Quality of Assets     Integration Costs
    Capital Adequacy and Debt  

Share Price - will the price of the target enable the synergies to be achieved whilst adding value to your own share price?

Earnings - what level of additional earnings will be generated as a result of the transaction, in both the short and long term?

Financial stability and consistency - will the transaction add to your financial stability and the consistency of earnings?

Overall asset quality - what is the quality of the assets held by the target? Will the transaction improve your overall asset quality?

Capital adequacy and debt - what will be the impact of the transaction on your capital and debt ratios? Could it create any capital adequacy issues?

Asset and liability mix - what will be the impact of the transaction on your asset and liability mix, in terms of currency, interest rates, maturities etc.?

Off-balance sheet risks - how will the off-balance sheet risks be affected by the transaction? Will there be excessive exposures to any particular markets which will have to be managed?

Profitability - how will the cost/income ratio be affected by the transaction in the short and long term?

Integration costs - what are the likely costs of the integration?

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