Module V· Contribution Analysis & Shareholder DilutionIntermediate

Question

What is contribution analysis, and how do you use it for stock-for-stock mergers?

Answer

Contribution analysis compares each company's share of combined sales, EBITDA, EBIT, net income, cash flow, and market value. In stock-for-stock mergers, it helps assess whether the ownership split is fair relative to economic contribution. If one party contributes 60% of EBITDA but receives 50% ownership, it is giving value to the other side unless synergies or strategic terms justify it.

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