merger and acquisition cases are one of the most common types of case interviews you'll see at least one m&a case in your upcoming interviews especially at consulting firms that have a large m&a or private Equity practice with sufficient preparation these cases are fairly straightforward and predictable once you've watched this full video you'll be able to solve any m&a case interview and treat m&a cases as freebies or easy wins during your interview process I'm a former Bane manager and interviewer and in this video I'll cover three topics with you the two major types of m&a cases
the five steps to solve any m&a case interview and the perfect m&a case interview framework before we begin let's quickly review some basic business definitions a merger is a business transaction that unites two companies into a new and single entity typically the two companies merging are roughly the same size after the merger the two companies are no longer separately owned and oper operated they are owned by a single entity an acquisition is a business transaction in which one company purchases full control of another company following the acquisition the company being purchased will dissolve and cease
to exist the new owner of the company will absorb all of the acquired company assets and liabilities the two major types of m&a cases there are two types of m&a cases you'll see in Consulting case interviews a company acquiring or merging with another company or a private Equity Firm acquiring a company let's look at the first type which is the most common a company is deciding whether to acquire or merge with another company for example Walmart is a large retail corporation that operates a chain of supermarkets department stores and grocery stores they are considering acquiring
a company that provides an online platform for small businesses to sell their products should they make this acquisition there are many reasons why a company would want to acquire or merge with another company in making an acquisition or merger a company may be trying to gain access to the other company's customers gain access to the other company's distribution channels acquire intellectual property proprietary technology or other assets realize cost synergies acquire Talent remove a competitor from the market or diversify sources of revenue the second type of m&a case is a private Equity Firm acquiring a company
this type of m& case is slightly different from the first type because private firms don't operate like traditional businesses private Equity firms use investor money to acquire companies in the hopes of generating a high return on investment after acquiring a company a private Equity Firm will try to improve the company's operations and drive growth after a number of years The Firm will look to sell the acquired company for a higher price than what was originally purchased for for example a private Equity Firm is considering acquiring a national chain of tattoo parlors should they make this
investment there are a few different reasons why a private Equity Firm would acquire Company by investing in a company the private Equity Firm may be trying to generate a high return on investment diversify its portfolio of companies to reduce risk or realize synergies with other companies that the firm owns regardless of which type of m&a case you get they both can be solved using the same five-step approach before we go over these five steps please take a second to give this video a like And subscribe to the channel so that you don't miss any of
our new case interview content this helps support our channel so that we can make more free videos for you the five steps to solve any m&a case interview step one understand the reason for the acquisition the first step to solve any m&a case is to understand the primary reason behind the acquisition the three most common reasons are the company wants to generate a high return on investment the company wants to acquire intellectual property proprietary technology or other assets or the company wants to realize revenue or cost synergies knowing the reason for the acquisition is necessary
to have the context to properly assess whether the acquisition should be made step two quantify the specific goal or Target when you understand the reason for the acquisition identify what the specific goal or Target is try to use numbers to quantify the metric for success for example if the company wants a high return on investment what Roi are they targeting if the company wants to realize Revenue synergies how much of a revenue increase are they expecting depending on the case some goals or targets may not be quantifiable for example if the company is looking to
diversify its Revenue sources this is not easily quantifiable step three create an m&a framework and work through the case with a specific goal or Target in mind structure a framework to help guide you through the case your framework should include all of the important important areas or questions you need to explore in order to determine whether the company should make the acquisition we'll cover the perfect m&a framework later in this video so stay tuned step four consider risks or consider alternative acquisition targets your m&a case framework will help you investigate the right things to develop
a hypothesis for whether or not the company should make the acquisition the next step in completing an m&a case depends on whether you are leaning towards recommending making that acquisition or recommending not making the acquisition if you're leaning towards recommending making the acquisition explore the potential risks of the acquisition how will the acquisition affect existing customers will it be difficult to integrate the two companies how will competitors react to this acquisition if there are significant risks this may change the recommendation that you have if you're are leaning towards not recommending making the acquisition consider other
potential acquisition targets remember that there is always opportunity cost when a company makes an acquisition the money spent on making the acquisition could be spent on something else is there another acquisition Target that the company should pursue instead are there other projects or Investments that are better to pursue these ideas can be included as next steps in your recommendation step five deliver a recommendation and propose next steps at this point you will have explored all of the important areas and answered all of the major questions needed to solve the case now it is time to
put together all of your work that you have done into a recommendation structure your recommendation in the following way so that it is clear and concise State your overall recommendation firmly provide three reasons that support your recommendation and propose potential next steps to explore now that you know the five steps to solve any m&a case interview let's cover what a perfect m&a case interview framework might look like the perfect m&a case interview framework breaks down the complex question of whether or not the company should make the acquisition into smaller and more manageable questions you should
always aspire to create a tailored framework that is specific to the case that you are solving do not rely on using memorized Frameworks because they do not always work given the specific context provided for merger and acquisition cases there are four major areas that are the most important number one market attractiveness for this area of your framework the overall question you are trying to answer is whether the market that the acquisition Target plays in is attractive there are a number of different factors to consider when assessing the market attractiveness what is the market size what
is the market growth rate what are average profit margins in the market how available and strong are substitutes how strong is supplier power how strong is buyer power and how high are barriers to entry number two company attractiveness for this area of your framework the overall question you want to answer is whether the acquisition Target is an attractive company to assess this you can look at the following questions is the company profitable how quickly is the company growing does the company have any competitive advantages and does the company have significant differentiation from competitors number three
synergies for this area of your framework the overall question you are trying to answer is whether there are significant synergies that can be realized from the acquisition there are two types of synergies Revenue synergies and cost synergies Revenue synergies help the company increased revenues examples of Revenue synergies include accessing new distribution channels accessing new customer segments cross selling products upselling products and bundling products together cost energies help the company reduce overall costs examples of cost energies include consolidating redundant costs and having increased buyer Power number four financial implications for this area of your framework the
main question you are trying to answer is whether the expected Financial gains or return on investment justifies the acquisition price to do this you may need to answer the following questions is the acquisition price Fair how long will it take to break even on the acquisition price what is the expected increase in annual revenue what are the expected cost savings and what is the projected return on investment in summary you've learned the two types of m&a cases the five steps to solve any m&a case and the perfect m&a case interview framework you can now tackle
any m&a case interview thrown your way if you want to watch how to solve other types of cases such as profitability case interviews I've linked videos in the description below last important message for you if you're looking for a step-by-step shortcut to learn case interviews quickly check out our comprehensive case interview course and books links are in the video description we teach the most robust effective case interiew strategies in the least timeconsuming way to save you hundreds of hours of prep time and help you land more multiple consulting job offers
