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Private Equity Acquisition cases

Bain BCG McKinsey
Edited on Jun 03, 2022
3 Answers
3.7 k Views
Anonymous A asked on Aug 11, 2020

Hi there,

I am trying to understand the general, high level differences between a standard M&A case, and a Private Equity acquisition case.

My understanding is that a lot of M&A cases focus on finding synergies between the two companies. Making sure that both companies fit well culturally is an important aspect to consider.
In a PE case, the objective is obvioulsy to make money, the mother company is a financial firm and hence there are no synergies here. We also dont talk about cultural fit because such acquisition is not a merger.
Are my understandings here correct ?

So when approaching a PE case, is it bascially a subset of M&A cases where we should scrap the synergies form our framework and focus mainly on financial metrics (attractiveness of the market, then stand alone value of the target company) ?


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updated an answer on Jun 03, 2022
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers


As usual - instead of just outlining topics and buckets à la Victor Cheng (which have no explicit inherent logic), the key to an outstanding case performance is laying out the precise logic according to which you will answer the question!

In PE cases, the current purchasing price is only of secondary importance! The only thing that really matters is whether you believe that you can resell the company after a couple of years at a price that exceeds the current asking price by the minimum ROI percentage.

For example, if the asking price is 100MM USD and the PE fund has a minimum ROI requirement of 35% and wants to hold the company no longer than 4 years, then the only thing that matters is whether you believe that this company can be sold for more than 135MM USD in 4 years!

So you have to understand/find out how valuation works in this industry. If, e.g., there is a pertinent industry multiple (say 10), then this mens that if you believe you can get the target company to annual profit of more that 13.5MM USD, then this will make sense financially.

So the task is then to analyze, whether it is realistic to bring the target company to this profit level of 13.5MM USD per year.* If yes, this is a good deal based on the financial analysis.

Cheers, Sidi

*: So you will need to check the Status Quo, how far is the target company away from the required annual profit, and how can profits be brought to that level. This is an embedded diagnostic question within a larger strategic go- or no-go question. The analysis is done with the usual instrument: a driver tree which disaggregates the focus metric (profit) in order to identify optimization potential.


Dr. Sidi Koné 

(Former Senior Engagement Manager and Interviewer at McKinsey | Former Senior Consultant and Interviewer at BCG)


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updated an answer on Aug 11, 2020
Bain Consultant | Interviewer for 3 years at Bain |Passionate about coaching |I will make you a case interview Rockstar


For a private equity fund the goal is to maximize returns and reach an annual return ~15% p.a. or whatever exceeds their internal target. As such the most important drivers to understand will be:

  1. Valuation of the asset
  2. Market attractiveness (size, growth, competitive landscape and trajectory)
  3. Value creation levers (revenue, cost, strategic, org/governance)
  4. Exit plan in ~5 years time

As you correctly point out any synergies or cultural considerations are not going to be relevant in this situation and would only indicate to your interviewer that you are using a generic M&A framework.



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Anonymous A on Aug 11, 2020

So how would I structure this ? 1- market attractiveness 2- business case including purchase price, expected performance and exit strategy ?

Content Creator
replied on Aug 11, 2020
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

There's absolutely right!

PE firms specifically go out and buy companies in order to make money from them (i.e. they either expect future profits to do well or they want to re-jig some things to add value). They're basically investment shops buying assets.

An M&A is when a "normal" company wants another company because they see value to their existing business. This is a much more "personal" decision and can often be tied to another objective rather than just pure profits (i.e. could be growth, market entry, facing off competition, etc.)

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