How to Prepare for an M&A Interview

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Thorough preparation is an important aspect of M&A.

Almost all deals which end up destroying value could have been prevented by more preparation at the pre-deal phase. This is the same spirit that should be taken with M&A interviews.

M&A jobs are typically highly oversubscribed, so the chances of you landing a position without any preparation are minimal.

In this article,?DealRoom?looks at time-proven ways of preparing for an M&A interview.

Our focus is on the questions that are asked, and the knowledge that you should possess?to land a job in a coveted M&A-related role.

Essential Interview Preparation in M&A

Assuming you’re not a freshly minted college graduate with no corporate experience, you will be asked to discuss some of the deals you’ve previously worked on in some capacity.

In particular, be prepared to provide details on your contribution to every part of the process, and the value that you added.

Like any ‘fit’ style questions, think about aspects of the deal that challenged you, obstacles you had to overcome, and what you learned from the deals.

Sample questions include:

• Why do you think that deal made sense before the transaction?
• Do you think the valuation was reasonable and why?
• Which valuation methods did you use?
• Has the deal been a subsequent success?
• How much due diligence did you conduct?

1. Technical Questions

There are often technical questions in the M&A interview.

There is a broad scope for questions here, including just about everything that could come up in an M&A transaction.

Sample questions include:

• How would you value our company?
• How would you arrive at a cost of capital for a private company?
• How would you assess in advance if a deal is accretive or dilutive?
• How would you conduct an LBO?
• How would you define and calculate goodwill?

2. Valuation Questions

This area is the bread and butter of most M&A work, so if you’re short on time, it’s the area you should focus most of your attention on.

Sample questions include:

• How do you arrive at FCF to the firm?
• What valuation methods do you use when valuing companies?
• Have you ever used real options valuation?
• What are some examples of industry-specific multiples?
• Have you ever achieved a highly inaccurate valuation and what did you learn from it?
• How would you value a company’s intellectual property assets?
• How would you value a distressed asset?
• What value do you attach to management in a company’s valuation?
• What are the weaknesses of the DCF method and how do you overcome them?
• How do you arrive at a cost of capital that you’re satisfied with?

3. Due Diligence Questions

This area offers candidates an opportunity to gain an edge over competitors that have overlooked an important part of any due diligence process.

Sample questions include:

• Tell us about your experience in due diligence.
• What issues are you looking out for in due diligence?
• If you’re given a set of financial accounts for the past five years, what’s the first thing you’re looking for in financial due diligence?
• Is there ever a time that you were able to uncover something material in a due diligence process and what was it?
• What skills can you bring to due diligence?

4. Know the Company

Finally, when we say ‘know the company’, we mean be familiar with its strategy, its recent transactions, deals that were a success, etc. Know its competitors and be prepared to answer why you’re applying for a job in this company rather than a competitor.

This ultimately is about knowing what questions you should ask. When they ask, ‘any questions?’ don’t lose the opportunity to show your insight.

Sample questions for you to ask include:

• What have you learned from your least successful deals?
• How many targets do you typically consider before making an acquisition (if applicable)
• Is there anything different about how you calculate your cost of capital?
• How many deals are in your pipeline currently?

Conclusion

Despite the quantitative nature of the field, M&A hires can come from a range of different backgrounds. What they tend to have in common is an attention to detail.

The best place to begin showing that attention to detail is the interview stage.

To get more knowledge about M&A you need to get as much information from the real M&A practitioners as possible. That's why we have created M&A Science. We recommend to start listening to free podcast series and subscribe to the Academy to keep up with evolving industry of M&A.