expert
Expert with best answer

Vlad

97% Recommendation Rate

365 Meetings

5,398 Q&A Upvotes

USD 229 / Coaching

Case prep for big 4 M&A interview

Laura asked on Jun 25, 2018 - 1 answer

Hey everyone,

I applied for a position in theTransaction Advisory - M&A division at the Big 4 and have some upcoming interviews in the next couple of weeks.

My questions are :

1. What case studies can I expect and how can I best prep for them?

2. Are there any frameworks specifically for M&A that I am expected to apply (not referring to DCF and other valuation methods here)?

Thanks in advance!

1 answer

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Vlad
Expert
updated his answer on Jun 25, 2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School
Book a coaching with Vlad

97% Recommendation Rate

365 Meetings

5,398 Q&A Upvotes

USD 229 / Coaching

Hi,

M&A Advisory interviews are different from consulting and are usually much more technical and detailed in financial part. Usually, they give you much more time to prepare and do the valuation on paper. Depending on the company you'll need to:

  • Find the relevant information in P&L, Balance sheet, CF statement
  • Do the simplified valuation using NPV: calculate cash flows and make assumptions about growth rate and discount rate
  • Do the valuation using comps - you'll have to explain which comps you will use and why
  • Do the valuation of the synergies
  • Play with different scenarios (e.g. how the stock-price will change if the deal terms leak into media, or how should the companies behave in a bidding process)

There are two types of frameworks you may use:

  1. Commercial due-diligence of the target company
  2. Synergies calculation of two merging companies

Note also that it can be a mix of both.

1. For Due Diligence you can use the following structure:

Market

  • Size
  • Growth rates
  • Profitability
  • Segments
  • Distribution channels

Competition

  • Market shares of competitors and their segments (see the next point)
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit economics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

  • Unit economics (Margins, costs) in current or target markets
  • Brand
  • Product mix
  • Key capabilities

Feasibility of exit (in case of a PE company):

  • Exit multiples
  • Exit time
  • Existence of buyers
  • Risks

2. For Synergies Calculation you can use the following structure:

  1. Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
  2. Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
  3. Financial synergies - working capital, capital structure, tax
  4. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  5. Total synergies potential in $, adjusted by risk (probability of failure)

Good luck!

(edited)

Related BootCamp article(s)

Cost-Benefit Analysis

Investments or single business cases need to be evaluated based on a certain set of criteria. Since financial performance is the key criterion in most cases you need to have an idea about future financial impacts. A key tool to asses this impact is the cost-benefit analysis which is used to determine the net effect of potential revenues and costs.

1 Q&A

Mergers and Acquisitions

Mergers & Acquisitions are often the answer to broader problems introduced in your Case interviews. Analyze feasibility, assets, target and industry to crack the Merger & Acquisition case

Competitive Response

In a competitive response case study, your job is either to analyze what your client should do in response to a move performed by a major competitor or to anticipate what competitors will do in response to a move performed by the client

Opportunity Costs

Opportunity costs are an economic concept to quantify benefits of (discarded) alternatives. They measure the lost benefits that occur if you choose the best alternative instead of the second best one.

Quiz

Related case(s)

General Holding

Solved 36.8k times
4.3 5 1261
| Rating: (4.3 / 5.0) |

Our client is a French holding company with annual revenues of about €1 billion. Their portfolio consists of different companies that are mostly in manufacturing industries such as the oil & gas industry and the automotive industry.They do not have a specific investment focus. They prefer to ... Open whole case

Chip equity

Solved 29.6k times
4.5 5 1048
| Rating: (4.5 / 5.0) |

Our client is an electronics holding called Chip’n’Chip. They want to invest in a Printed Circuit Board (PCB) manufacturer called OnBoard, and asked you whether it’s going to be a good investment. How would you help them? Open whole case

Paper Print

Solved 13.3k times
4.2 5 314
| Rating: (4.2 / 5.0) |

A printing company is planning to take over another printing company with similar technology and printing machines. The candidate is supposed to evaluate the acquisition by answering a line of questions that are presented in the “suggested approach” section. Open whole case

SuperBurger

Solved 10.9k times
3.9 5 1119
| Rating: (3.9 / 5.0)

Our client is SuperBurger, a fast food chain that operates in the same class as McDonalds, Wendy's, Burger King and so on. They're the fourth largest fast food chain worldwide in terms of number of stores in operations. SuperBurger owns some of its stores, but 85% of its stores are owned by franchis ... Open whole case

REA Reinsurance

Solved 9.7k times
4.1 5 907
| Rating: (4.1 / 5.0)

Your client, REA, is a reinsurance company. REA recently acquired another reinsurance company (approximatively same size): the choice of this company was notably based on its product portfolio as well as its market presence which appeared complement with REA. However, the acquisition is not well r ... Open whole case