M&A Interview Questions

What does it mean for a deal to be accretive vs. dilutive?

How do you calculate the cost of cash in an M&A funding analysis?

What's the exchange ratio formula for a 100% stock deal? If the buyer trades at $50 and the offer price is $70 per target share, what's the exchange ratio?

Name 4+ reasons a strategic buyer can pay more for a target than a financial sponsor.

Calculate the implied premium paid. Unaffected share price = $50, offer price = $67.50.

What is due diligence and what are the main types?

What is a definitive merger agreement and what are the key provisions?

What is HSR review and how does it affect M&A timing?

What are cost synergies vs. revenue synergies? Which are more reliable?

When would an acquirer choose to pay with stock instead of cash?

What's the difference between a stock deal and an asset deal, and which does the buyer typically prefer?

What are the main steps in a sell-side M&A process?

What is a hostile takeover and how is it executed?

What is a Material Adverse Change (MAC) clause?

How does activist investor pressure typically lead to M&A outcomes?

In an all-stock M&A transaction, how do you quickly know if the deal is accretive or dilutive (without modeling)?

Firm A acquired the remaining 70% of Firm B for $600M. Firm B has $120M of debt and $80M EBITDA. What's the transaction EV/EBITDA multiple?

Transaction: Offer value $800, net debt $250, LTM EBITDA $100, pretax synergies $5. Calculate EBITDA multiple adjusted for synergies.

Company A (P/E 10x) acquires Company B (lower P/E). 5% interest rate, 40% tax rate. Should A use debt or stock for maximum accretion?

Buyer: $10,000 assets, $8,000 liabilities, $2,000 equity. Seller: $1,000 assets, $800 liabilities, $200 equity. Buyer pays $500 cash for 100% of seller. Walk through the combined balance sheet.

What would happen to M&A activity if the corporate tax rate dropped to 20%?

Buyer pays $100M for a target in an all-stock deal, but the market decides the target is only worth $50M. What happens?

Two companies make the same widget. Why might they trade at different EV/EBITDA multiples?

Name the 4 types of M&A synergies.

Why wouldn't a company use all its available cash to fund an acquisition?

Compare cash, debt, and stock as M&A funding sources.

Name several reasons an announced M&A deal might fail to close.

What is goodwill and how does it arise in an M&A transaction?

What is a fairness opinion and why is it important?

What is an earnout and when is it used in M&A?

What is a go-shop provision and when is it used?

Acquire a target for $1B (50% cash / 50% debt). $100M asset write-up at 40% tax. Seller has $200M assets, $150M liabilities. Walk through the buyer's balance sheet effects.

Company A (P/E 15x) buys Company B (P/E 10x) with 100% debt. At what interest rate does the deal turn dilutive (assume 40% tax rate)?

Company A: EV $100, market cap $80, EBITDA $10, NI $4. Company B: EV $40, market cap $40, EBITDA $8, NI $2. A acquires B with 100% debt at 10% interest, 25% tax rate. What are the combined multiples?

Acquire 70% of a target for cash. Target: $100 equity value, $180 assets, $100 liabilities, $80 book equity. Walk through the acquirer's balance sheet.

Company A: EBT $300M, 50M shares at $10, tax rate 50%. Company B: NI $25M. A buys B for 100% stock at a $200M transaction value. Pretax cost synergies needed to break even?

Give me an example of how you might estimate revenue and expense synergies in an M&A deal.