Interview prep · M&A
M&A interview questions
M&A rationale, accretion / dilution, synergies, deal structures, and the merger-model mechanics you need cold.
Sample questions
What makes an acquisition accretive or dilutive to EPS?+
Compare the buyer's P/E to the effective cost of the acquisition. A rough all-stock rule: if the acquirer's P/E is higher than the target's P/E, the deal is accretive; if lower, dilutive. More generally, if the after-tax yield on what you're acquiring exceeds the after-tax cost of financing (cash, debt or stock), EPS rises.
What are synergies and what are the two types?+
Synergies are the incremental value created by combining two firms. Cost synergies - eliminating duplicate functions, facilities and headcount, plus purchasing scale - are more reliable and easier to realize. Revenue synergies - cross-selling, new markets, pricing power - are larger in theory but far less certain, so buyers discount them.
What's the difference between a strategic buyer and a financial buyer?+
A strategic buyer is an operating company in (or adjacent to) the same industry that can realize synergies and often pays more. A financial buyer (PE firm) buys for financial return via an LBO and is constrained by what leverage and target IRRs allow, so it typically pays less absent synergies.
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