I agree with you that there was too much assumption in the...

I agree with you that there was too much assumption in the analysis.

There are so many moving parts that can affect the calculations. After such a major acquisition, how can we be certain about the financials for FY2019, let alone FY2021?


Hence, the very clear and unambiguous disclaimers of:

"...bearing in mind that financial forecasting is not a precise science..."

and

"Again, all figures and analysis presented in this post are intended to be indicative, not prescriptive, and should therefore be interpreted with the degree of caution and prudence ..."


And in this case, the assumptions were confined merely to some modest revenue growth and EBITDA margins, based on precedent for REECE and on the publicly available information relating to MORSCO, without any hairy-chested or outlandish extrapolations, either favourable or unfavourable.

So, I guess, that by any account of reasonableness, should cover most outcomes on the probability distribution curve, with the exception of the, say, 20% or 30% probabilities of tail event outcomes.

I guess the reason I conducted this exercise for myself was that, in its absence, I would have need to make an investment decision involving several tens of thousands of my hard-earned, while shooting totally blind.

So, to my way of thinking, getting to 70% (or 60%, or even 50%) of the answer is way better than operating with no sense of any answer whatsoever.

And besides, we aren't dealing with the merger of two entities where the forecast risks are acutely high, such as two commodity companies, or two beaten-up smokestack businesses or two highly conceptual technology businesses, or two businesses where the "synergy" gains are meaningful in the context of the current earnings of each business.

Instead, we are dealing here with two relatively mature, sensibly-managed businesses, with relatively stable, and reasonably predictable, financial performance for which there exists not-insignificant precedent.

So forecasts - while will certainly not be 100% accurate - are not likely to be so wide of the mark as to be totally meaningless, I like to think.

As such, I believe that modelled forecasts, because they involve limited explicit deduction, capture the salient distinctions in financial pedigree of the two companies involved, but admittedly to not an exact extent.

But, as the alternative to nothing at all, salient is good enough.

Of course, I understand that everyone has their own unique approach to major seminal situations such as the one REECE shareholders are facing.

Mine involves at least knowing in which approximate direction the target lies before I pull the trigger.

I did the work and thought that - to the extent that others were going to do the same - I'd share my findings to save them the effort.

As I said, I understand if it is of no value to anyone but me, but that's the nature of collaborative forums such as this: sometimes we encounter posts that add value; often they are simply a waste of our time.

That is just the nature of the beast.