Case interview examples › M&A
M&A case interviews
A client is thinking of buying a company, or of making a large investment. You judge whether the deal makes sense and what it is worth.
How an M&A case runs
The buyer is either strategic, a company buying a competitor, supplier or neighbouring business, or financial, such as a private equity fund. The questions follow the deal: is the target’s market attractive, is the target a good business within it, what does the combination add, and what price still leaves the buyer better off?
Expect a valuation step: a profit figure and a multiple, or a stream of cash flows to discount. Interviewers care more that you set it up correctly and sanity-check the result than that you finish the arithmetic fast. Investment cases follow the same path without a target company: is the project worth more than it costs?
A structure to start from
Should the client buy?
- The target’s market
- Size, growth and margins
- How competitive it is
- The target
- Revenue and profit, and how steady they are
- Customers, products and management
- Synergies
- Revenue: cross-selling, pricing
- Cost: overlap, scale, purchasing
- Price and risk
- Value alone plus synergies, against the price
- Integration, culture and financing
A strategic buyer’s case leans on synergies and fit; a private equity buyer’s leans on cash flow, debt and the exit. Say which buyer you have before you build the tree, and ask what the client wants the deal for: growth, capability, scale or a defensive move.
The maths it tests
- Enterprise value = profit × multiple
- Usually EBITDA times a sector multiple. Ask which profit figure and why that multiple.
- Value of a steady cash flow = cash flow ÷ (discount rate − growth)
- The quick perpetuity. A 10% rate and 2% growth turn 8 into 100.
- Synergy value
- Annual synergy, minus the cost of achieving it, valued the same way as the business.
- Debt and covenants
- How much the buyer can borrow against the target’s profit, and what that leaves for equity.
Where candidates lose marks
- Counting synergies in full from the first year. They arrive late and partly, and they cost money to achieve.
- Valuing the target without comparing the value with the price asked.
- Ignoring the alternatives: building the capability, or partnering, may beat buying it.
- Leaving out integration risk, which is where most deals that disappoint go wrong.
M&A cases to practise
- Bilderberg Telco Foundation Bilderberg's national telecom operator must decide whether investing in a new payphone network across the island still makes sense.
- Velantis Group Intermediate Velantis Group, a US apparel multinational, is evaluating an acquisition opportunity in fashion retail.
- Heritage National Bank Intermediate Heritage National Bank must select the merger target that gives its integration the best chance of success.
- The Rocky Mountain Challenge Advanced A US television broadcaster has bid to acquire the coverage rights to the Rocky Mountain Challenge, a three-week race — what is that bid worth?
- Halcyon Semiconductor Advanced Halcyon Semiconductor, a US analog and mixed-signal chipmaker, must decide whether to acquire Ampforge, a fast-growing fabless startup selling precision analog chips into the electric vehicle and battery energy storage market, and on what terms.
- Linden Therapeutics Advanced Linden Therapeutics, a US specialty pharmaceutical company facing a patent cliff, must decide which of three rare-disease assets to acquire from a set of three targets, at what price, and how to finance the transactions under binding debt covenants.
Other case types
Every case in the library