Hi! I recently came across an M&A case, and I really struggled to find a convincing approach. I am especially unsure how to do a valuation of the acquisition target - are we expected to do a DCF analysis during the interview? Any advice welcome! :)
Hi! I recently came across an M&A case, and I really struggled to find a convincing approach. I am especially unsure how to do a valuation of the acquisition target - are we expected to do a DCF analysis during the interview? Any advice welcome! :)
Hi there!
In essence, the fair price of a company (assuming that you keep running the company) is its stand alone value (current operational profits) PLUS synergies & optimization that can be expected over a certain investment horizon. Discounting is almost always disregarded in case interviews (however you should mention it).
The interesting thing is that this principle thinking frame is not only true for M&A situations, but for 90% of all strategic decision cases that you will ever encounter (market entry, new product, capacity expansion, licence purchase, etc. etc.). It is always about value creation! If you learn to rigorously start your thinking from the principles of value creation, the typical case frameworks from well-known books like Case in Point etc. become practically obsolete, while at the same time your thinking becomes way more rigorous and mature.
Then for the structuring, there are a couple of simple notions that you need to adhere to in order to effectively set up and navigate strategic cases (for example, contrary to what is taught in the popular books, NEVER start with qualitative questions like "first I would like to understand the market context..." - this is exactly how you should NOT work as a consultan! This would be the definition of "boiling the ocean" ;-))
Cheers, Sidi
(editiert)
Hi there,
Both frameworks in Case in Point and Secrets of Case Interview for M&A cases can be good starting points.
Sometimes you may need to do DCF calculation but in a very simple way. E.g. applying perpetuity formula (FCF)/(r-g) or using valuation multiples. Most of the times you will not need more than that.
Best
Serhat
Hi,
Here is how to approach M&A and synergies cases:
1. For due diligence M&A cases you can use the following structure:
Market
Competition
Company
Feasibility of exit:
2. For Synergies Calculation cases you can use the following structure:
In private equity interviews, the cases will be much more detailed in financial part. Depending on the company you'll need to:
Good luck!