In the previous episodes, we discussed the approach, we produced the formulas, and we also talked about some important things that feed these formulas, namely the value drivers. We paid special attention to the cost of capital and we also mentioned the fact that we have to run some scenario analysis. And we talked about how exactly we extract these value drivers for the financial information for the company. Now, in this episode, and in the next one, I would like to apply all that to the overall idea of value creation. After all, we mentioned many a time throughout this course, that creation of value is the by far the most important idea, and the central topic in any M&A transaction. So, let's call that value creation in M&A, and that'll be the first part. So what we will do is, we analyze the transaction from buyer or bidder B buys the target. And that becomes the company B+T, whatever it is, a merger, or a takeover or maybe a completely new entity. So we value B, we value T and then we value B+T. And then after having done that, then we find, Gain or loss. Well, first of all, we make some assumptions here, and for all three of these for B, so we analyze not one case, but two cases. So we'll have B, T1, and T2. So clearly, it will be the of B+T1 and B+T2, and we are comparing what is better. Now, we will assume that it will be super normal growth. For ten years, in all cases for all five valuations. And then there will be no growth. Thereafter, We also will postulate that T is 40% and applies throughout for all these cases. Well, other value drivers, Xs, Bs, Gs, they will be all different for all these three companies and two combinations. So let's proceed. So the table on this page goes like this. So this is B, this is T1, this is T2, B+T1, and then B+T2. Now the parameters will be net operating income which is X subzero, then we will also assume that these companies have some debt and when you buy the company, you assume debt but you buy equity. So here will be the market value of debt. Now B, now R, and weighted average cost of capital. So these will be all givens. So I'll quickly create a table here. And we know that we have to also find G, which is in this case B times R. I will reserve this for the rep calculations. So, This is to sort of see better. Now, we will start with net operated income. It will be 30 million here, 20, 20. And when one company buys the other, we assume that there is no synergy in terms of net operated income. So we just put this plus this. So 50 and then 50 because we want these targets to be basically all the same size or similar size. Now the market value of debt is 60, 20, 20, so combined that will be 80 and 80. Again, we do not assume any destruction of the market value of that here. Now B, 1, 110, for target two it's 150, so it has much greater growth potential. If B buys T1 then it's one tenth, so you sort of assume the higher investment rate of T1. But if B buys T2 which is a fast growing company then it stays at one. Now profitability rate 21% here, 20, 16, 24 and then 23. So basically, you see that in both combinations you see a much greater profitability. Now comes with average cost of capital 10% here, 11, 12, 10, and 12. And now we have to make the first mental exercise and calculate B times R to get these Gs. So here it will be 21%, 22%, 24%. Here it's 26 times 4, the highest, and here it's 23% back again. Now then, so now we're all set with value drivers because let me recall that M is equal to 10 and the tax rate is 40% for all valuations. So basically what we do, we feed the formulas with all these components and then we get the result. The result will be in the following table. So this is total value. So this is debt and the equity. But this will be value of equity, because we have to subtract debt here. And now, we have bidder. We have target one, we have target two. And then the two combinations, B+T1, and then B+T2. And the numbers, the results of this valuation that you can check. Again, these are 467 million for the bidder. That gives us, we subtract 60, which is 407 for its equity. And that will field us, it will be for target one 260, for target two 167. For the combination B+T1, 1, 134, and B+T2, 638 and after having subtracted that, we arrive at technical values of 214, 147, 1054 and 558. So, so far so good. So we've valued all these B, T1, T2 and the combinations. We have prepared the information for further conclusions. Mainly, what is better and why? In the next episode, we will use these numbers to arrive at gains and losses.