What typically does "cash flow adjustment" involve in a merger model?

In a merger model, "cash flow adjustment" primarily involves adjusting cash flows to reflect the synergies realized from the merger as well as accounting for any one-time costs associated with the transaction. This includes considering the incremental revenue enhancements or cost savings that the combined entity can achieve, which are often a key rationale behind pursuing a merger. Additionally, one-time costs such as restructuring expenses or transaction fees need to be factored in, as they can significantly impact the financial performance of the new entity in the short term.

By making these adjustments, analysts can present a more accurate view of the future cash generation capabilities of the merged company, which is crucial for assessing its valuation and financial health post-merger.