Table of Contents

• What’s New?: New Content (of course!)

• Ok, we love this video….

• M&A Analysis: Analyzing through the wrong lens?

• What have you missed?

• One month free?

• Do you want to talk about training and consultancy?

• Are you not signed up?

From a Quiet Corner in Doha,

As I write to you from the gentle hum of a hotel bar in Doha, “The 1975” playing in my earbuds, I find myself wrestling with an intriguing paradox. My recent travels have given me ample time to dive deep into complexity science, particularly regarding our investment work. The question remains: How do we reconcile the seemingly impossible task of modeling complex, adaptive systems—like evolving business models—with our need to make informed investment decisions?

While I'll be the first to admit that predicting the future isn't my strong suit, I believe there's significant value in asking the right questions about it. This brings us to a crucial point: understanding complex, adaptive systems isn't just an academic exercise—it's becoming increasingly central to thoughtful investment analysis. In this edition, I'd like to explore this intersection with you. Check out our new playlist, “Embracing the Complexity of Markets.” I think it will get you thinking. See the links below.

We’ve also had some nice press (link) this week. Thanks to Business Cloud for showcasing us.

If you’ve just signed up for our free access, don’t be daft; grab a free 30-day trial to our Premium Plus (Access All Areas) subscription. Sign up using the INSIGHTONE code for 30 days of free access to everything.

Just hit this link

Best wishes

Download the Apps: Sign up Using the INSIGHTONE code and get 30 days free access to everything.

What’s New?: New Content (of course!)

Discover powerful new investing resources on InsightOne. From market fundamentals to advanced strategies, our latest content helps experienced analysts and newcomers make more informed decisions. Launch the app now to explore our newest tools and insights.

What's New on InsightOne?

1. Embracing the Complexity of Markets
   
   Discover the hidden patterns shaping our financial world. This eye-opening playlist explores how nature's intricate dances and cutting-edge science unlock new perspectives on market behavior. Witness how the mesmerizing swirls of starling flocks mirror the ebb and flow of stock prices. Delve into the realm of physics, where the laws governing particles reveal surprising parallels with market dynamics. Uncover the power of topological analysis, offering a multidimensional view beyond traditional analysis.

    

   

2. Reshaping Business: The Art of Corporate Restructuring
   
   This comprehensive video playlist delves into the intricate world of corporate restructuring, exploring events that trigger organizational overhauls. It examines the complex debt hierarchy and its implications for stakeholders during restructuring. The series distinguishes between Chapter 7 liquidation and Chapter 11 reorganization bankruptcies, elucidating their impacts on businesses and creditors. Additionally, it covers critical financial assessments, including cash flow and balance sheet insolvency tests, which are instrumental in evaluating a company's financial health.

   

3. Unlock Capex Insights: Building Powerful Depreciation Waterfalls: Want to level your financial modeling? Learn how to build a powerful Depreciation Waterfall in Excel that clarifies your capital expenditure analysis. This comprehensive guide breaks down how to track and forecast investment and maintenance capex over time, giving you unprecedented insight into asset management strategies.
   
   Follow along to master this essential tool, which helps you answer critical questions about sustainable growth rates, capital intensity, and maintenance requirements. It is perfect for analysts and investment professionals who need to build robust, defendable investment theses through detailed capital allocation analysis. 

   

Ok, we love this video….

M&A Analysis: Analyzing through the wrong lens?

The traditional approach to analyzing mergers and acquisitions has long relied on EPS accretion-dilution as a primary metric of deal success. However, this methodology is inadequate for understanding true value creation in M&A transactions. As investment analysts, we need to fundamentally reshape our analytical framework to focus on what truly matters: the relationship between acquisition premiums and realizable synergies.

The Limitations of EPS Analysis

While widespread, EPS accretion analysis provides only a narrow view of deal economics. It tells us whether a transaction will generate accounting growth but fails to answer the more critical question: Will the deal create genuine economic value? This metric becomes particularly problematic when viewed in isolation, as it lacks crucial context about the cost of capital and incremental returns generated from the transaction.

A More Thoughtful Framework: Premium vs. Synergy Value

The essence of M&A value creation can be distilled into a straightforward comparison: what you pay (the offer premium) versus what you get (the present value of synergies). This framework shifts the focus from simple earnings growth to actual value creation, providing a more meaningful basis for deal analysis.

One of the most challenging aspects of M&A analysis is forecasting synergies. Rather than attempting to predict specific synergy outcomes—an exercise that often proves futile—analysts should work backward from the offer premium to understand what synergy profile would be required to justify the deal price.

Implied Synergy Analysis: A More Practical Approach

This alternative methodology involves:

1. Starting with the offer premium as a known quantity

2. Constructing the synergy scenarios that would need to be achieved to justify this premium

3. Analyzing the timing and magnitude of required synergies

4. Assessing whether these synergy requirements are realistically achievable by the acquiring company

This approach provides several advantages:

• It grounds the analysis in concrete numbers (the actual premium paid)

• It creates a clear framework for evaluating management's ability to execute

• It helps identify potentially overpriced deals before they occur

When the present value of achievable synergies falls short of the premium paid, value destruction becomes inevitable. This simple but powerful insight helps explain why so many M&A transactions fail to deliver shareholder value. The upfront premium represents a certain cost, while synergies remain uncertain and time-dependent.

Implications for Investment Analysis

As analysts, we need to:

• Move beyond simple EPS accretion analysis

• Focus on understanding the relationship between premiums and required synergies

• Develop more sophisticated frameworks for assessing management's ability to deliver synergies

• Consider the time value of money in synergy realization

• Account for execution risk in synergy achievement

Conclusion

The investment community's continued reliance on EPS accretion as a primary metric for M&A analysis needs to evolve. By focusing instead on the relationship between offer premiums and required synergy profiles, analysts can develop more meaningful insights into potential deal outcomes. This approach provides a more robust analytical framework and helps identify potential value destruction before it occurs.

The key is not to predict exact synergy outcomes but to understand the level of synergies required to justify the premium paid and then critically assess whether these requirements are achievable. This framework provides a more practical and valuable approach to M&A analysis that better serves the needs of investors and stakeholders.

What have you missed? 3,000+ digital assets: Highlights from the back catalog

Now that we’ve built a pretty extensive portfolio of digital assets, we can explore the vault and highlight a few programs you might have missed.

One month free?: Unlock Your Financial Potential

Haven't explored our platform yet? Here's your chance to access the world's most comprehensive financial knowledge:

• 3,000+ curated digital assets

• 4,000+ interactive questions

• Cutting-edge EdTech

• Structured learning paths

• iOS and Android apps for mobile learning

• 100% analyst-curated content with #1 ranked pedigree

In today's financial landscape, average knowledge isn't enough. What you don't know can be your biggest liability. We're the choice of elite institutions worldwide, and now we're offering you the same advantage.

Ready to elevate your expertise? Use this exclusive code for a FREE month of our premium subscription. Don't just keep up—stay ahead.

Invest in yourself. Your future self will thank you.

Feel free to share this code. Our mission: Show you what you're missing out on!

INSIGHTONE

• Use the INSIGHTONE code

• Click this link

• Sign up and enter the discount code (INSIGHTONE)

• Click Redeem

• Then download the App (iOS or Android) and get going anywhere.

We’ve also put together a punchy video of the InsightOne platform - no chat - just some flash graphics and music showing off InsightOne at its best. If you have 100 seconds, take a look at this short video:

So, I think we are doing the right stuff. I know I can’t and don’t think of everything, so let me know if you have any ideas or feedback. I’m on [email protected].

Have you not downloaded the Apps yet?

The InsightOne App is live and available for download on the App Store and Google Play. Click on the images, and we will take you to the relevant App Store.