These terms are often used interchangeably. Specify the model's purpose, period, and assumptions.
| Model | Question it answers | Example |
|---|---|---|
| Acquisition pro forma | How does a transaction change the combined business? | Combine buyer and target results, then show financing and identified adjustments. |
| Forecast | What do we currently expect? | Monthly revenue, hiring, margins, and cash through next December. |
| Projection / scenario | What happens under a hypothetical assumption? | A delayed acquisition close or the loss of a major customer. |
Pro forma: the effect of a transaction
Keep buyer history, target history, adjustments, and combined results in separate columns. This distinguishes acquired earnings from assumptions.
A buyer with $30 million of annual revenue and a target with $10 million have $40 million combined before eliminations or growth. This does not establish next year's revenue or represent the buyer's reported results if the acquisition closes in July.
Forecast: operating drivers and timing
A forecast starts with what management expects: customer demand, capacity, pricing, staffing, delivery schedules, and collection patterns. It translates those drivers into a period-by-period financial view. Actual results replace completed periods, while new evidence changes the remaining outlook.
An acquisition forecast may contain a pro forma bridge showing the change in business perimeter, followed by expected growth, attrition, integration milestones, and costs. These views distinguish the acquisition effect from operating performance.
Projection: hypothetical assumptions
Test a September closing, 25% synergy realization, or a higher borrowing rate in a separate scenario. Show its assumptions alongside the base case to distinguish expectations from sensitivities.
In its attestation terminology, the PCAOB distinguishes forecasts based on expected conditions from projections that include hypothetical assumptions. Label hypothetical assumptions clearly in the model.
Name the period and basis in the title
“Combined historical year, adjusted EBITDA before synergies” and “Closing-year forecast, six months of target ownership” are useful titles. “Pro forma EBITDA” alone leaves the reader to guess whether the figure includes addbacks, a full target year, or savings that have not occurred.
The SEC's acquisition disclosure guide describes specific rules for filed pro forma information. This site's builder is a simplified management scenario tool focused on revenue, EBITDA, valuation, and financing.