Contribution Analysis

Investment Banking Glossary

Sanity-check used primarily in stock-for-stock mergers: compares each company's percentage contribution to combined revenue, EBITDA, and net income against the ownership split implied by the exchange ratio. If the target contributes 35% of EBITDA but receives only 25% of pro forma ownership, the exchange ratio favors the acquirer. Market-neutral check on fairness of the exchange ratio.

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