How does a buy-side M&A process work?

Walk through five steps: the client's criteria, screening from a long list to profiled targets, valuation with a merger model and a walk-away price, the approach or auction bid, then diligence, financing and closing. Contrast it with the sell side.

What the interviewer listens for

• Do you start from the client's criteria?
• Do you go from a long list to a short list with profiles?
• Do you cover valuation, a merger model and a walk-away price?
• Do you separate an auction from a private negotiation?
• Do you contrast it with the sell side?

Common mistakes

• Describing a sell-side auction from the seller's side instead of the buyer's.
• Skipping the merger model.A corporate buyer cares about EPS and credit metrics, not just the target's value.
• Leaving out the walk-away price that keeps a buyer disciplined in an auction.
• Forgetting financing, which a buyer needs in place before a binding bid.

Likely follow-ups

• Why would a buyer hire a bank at all?For a view on price from comparable deals, help with the approach and negotiation, financing, and sometimes a fairness opinion. Big serial buyers do much of it in-house.
• How are buy-side fees usually paid?Mostly as a success fee if the deal closes, sometimes with a retainer, so a bank whose client loses the auction can earn little.
• What goes into a target profile?What the company does, its size, growth and margins, who owns it, recent news, why it fits the client and a rough value range.

More finance technicals

• How do you tell whether an acquisition is accretive or dilutive?
• Walk me through a merger model.
• What are synergies, and which kind would you trust more?
• Would a buyer rather pay for an acquisition with cash, debt or stock?
• Walk me through a sell-side M&A process.

M&A interview questionsAll interview questionsFree technical questionsPaper LBO practice