What is typically the second step in a merger model after determining the purchase price?

• A. Combine financial profiles
• B. Determine purchase methods
• C. Create integration plans
• D. Project future revenues

Answer: (B)

After determining the purchase price in a merger model, the next logical step is to determine the purchase methods. This involves deciding how the acquisition will be financed, which could include cash, stock, or debt financing. Understanding the purchase methods is crucial, as it impacts the overall financial structure of the deal, affects the financial metrics and ratios, and influences the creation of value in the merger. The choice of purchase method can also have implications for the financial health of both companies involved in the transaction and may shape subsequent financial projections and integration strategies.

While combining financial profiles, creating integration plans, and projecting future revenues are important elements of the overall merger analysis, they typically follow the decision on how the acquisition will be financed since the method chosen can significantly influence those areas.