M&A case interview

An M&A case asks should the client acquire this target or one like it, and what is it worth? This is where value gets destroyed at scale in the real world, because the emotional and strategic momentum of a deal overwhelms the arithmetic. Your defence is a five-question screen, run in order. A hard "no" at any gate can end the deal before you ever build a model.

What are the five questions in an M&A screen?

1. Strategic rationale, why acquire at all? What does buying do that building or partnering can't? Real logic looks like access to a capability, a customer base, a technology, scale economics or a geography. A story looks like growth the core can't deliver, dressed up. A weak answer here is the best single predictor of a value-destroying deal. The full taxonomy of rationales and their traps comes later, in the deal work.
2. Target attractiveness, is this a good business? Run the finance teardown at screen depth. Look at margins and their trend and at growth and unit economics. Check moat and industry structure. Then look for the red flags: customer concentration, key-person risk, aggressive accounting (see financial shenanigans). A great business at a fair price beats a cheap business that's cheap for a reason.
3. Ability to win and integrate, can this acquirer own it? The same target is worth more to one buyer than to another. Does the acquirer have the capability to run it, the cultural fit to keep its people, and the integration muscle to capture what it paid for? The graveyard of M&A is full of good targets bought by acquirers who couldn't integrate them.
4. Value and price, with stressed synergies. Value the target standalone by multiple or DCF. Then estimate the revenue and cost synergies. Then comes the crown move: stress the synergies before you let them touch the offer. Strip out double-counting. Subtract dis-synergies, the customers or talent you lose because of the deal itself. Phase the synergies in over a realistic timeline, since they won't all land on day one, and net out the one-time cost-to-achieve. A sound offer is standalone value plus only a fraction of risk-adjusted synergies, because paying the full synergy value hands your shareholders' upside to the seller. Name your walk-away price.
5. Deal risks, what kills this? Integration failure, culture, regulatory/antitrust, financing, overpayment, the dis-synergies from gate 4. A recommendation that hasn't named its top risks and their mitigations isn't finished.

Why does the model come last?

Notice the through-line. Gates 1 to 3 can kill a deal with no model at all, and most weak deals die there. The model in gate 4 comes last, and it exists mostly to find the price at which even a good deal turns bad. Worked Example 3 runs the full screen on an Indian forward-integration acquisition and stress-tests the synergies down to a sensible offer range. You'll find the deep valuation mechanics in the Finance galaxy. The deeper synergy and integration craft comes in the deal work later on. Here you learn the screen that decides whether those tools are even worth opening.