Hedge Funds
Prepalyst has 22 event driven interview questions with model answers, covering deal break risk, spread maths, regulatory timelines and downside to unaffected. Every question is graded on technical accuracy, completeness and interview communication. Practice is free.
A basic arithmetic and risk-framing question in event-driven interviews.
A target trades at $96 after receiving a $100 all-cash offer expected to close in four months. Calculate the gross spread and simple annualised return. What does that number omit?
Event-driven funds test whether candidates can translate enterprise value into class-specific recovery before discussing a distressed catalyst.
A bankrupt company is worth $180m after restructuring costs. It has a $40m revolver, $100m first-lien term loan and $80m unsecured notes. Ignoring interest and fees, calculate each class's recovery and explain why the…
Funds expect analysts to turn a merger agreement into a concise risk checklist.
Which provisions in a merger agreement would you read first, and why?
A first-round special-situations calculation testing whether you understand why a tender premium is not earned on every share tendered.
A company offers to repurchase shares at $25 while the stock trades at $23. You buy and tender 100 shares. The offer is oversubscribed and proration is 50%; assume untendered shares remain worth $23. What is your dollar…
Special-situations funds use rights offerings to test dilution maths and capital-structure judgement.
A company offers one right for every four shares owned; five rights buy one new share at $10. The stock trades at $14 before the rights detach. What happens to value, and what would you investigate?
A first-round check that you understand the core event-driven strategy before discussing a live deal.
What is merger arbitrage, and where does its return come from?
An entry-level special-situations question that tests whether you can identify non-fundamental sellers.
Why can a spin-off trade below intrinsic value immediately after distribution?
Event-driven funds use stub trades to test relative-value construction and corporate-action mechanics.
A holding company owns a listed subsidiary worth $900m, has $200m of net debt and no other material assets, but its own equity trades at $500m. Is this automatically a stub trade?
A judgement question for funds that trade hostile bids and activist situations.
A target adopts a poison pill after an unsolicited bid. Does that mean the bid will fail?
Event-driven teams test whether a short thesis has a dated mechanism rather than a vague valuation opinion.
What makes a catalyst-driven short different from simply believing a stock is overvalued?
A common follow-up that tests whether you can translate a merger spread into market-implied odds.
A target trades at $45. A cash bid offers $50, and you estimate a $35 break price. Ignoring time value, what completion probability is implied by the market price?
Event-driven funds ask this because spin-offs are a recurring, structural inefficiency.
A large-cap company announces it will spin off a division. How would you analyse the opportunity, and where does the inefficiency come from?
An analyst workflow question for funds trading predictable forced flow around index additions and deletions.
A widely tracked index announces that a $6bn market-cap company will be added at Friday's close. Passive funds tracking the index own an estimated $800bn and the stock's average daily dollar volume is $35m. How would you…
A core diligence discussion for merger-arbitrage teams covering concentrated industries.
How would you assess antitrust risk in a proposed merger between two direct competitors?
Event-driven funds either run campaigns or trade alongside them.
An activist takes a 6% stake in a company and demands a break-up. How do you assess whether to invest alongside them?
The construction question that follows the cash-deal merger arb question.
Acquirer A is buying Target B in an all-stock deal at a 0.5x exchange ratio. A trades at $80, B at $38. Construct the trade, calculate the spread, and explain what you're exposed to.
A merger-arbitrage follow-up designed to test whether a candidate understands when an exchange-ratio hedge stops being static.
Target B will be acquired for a fixed $60 of Acquirer A stock, subject to a collar. If A trades between $80 and $100 during the pricing period, B receives 0.667 A shares. Below $80, B receives 0.75 shares; above $100, B…
A senior event-driven interview question combining expected value with portfolio-level risk.
A cash deal offers 8% upside on close and 24% downside on break. You estimate 85% completion probability. How do you decide position size?
A classic structural inefficiency that event-driven funds return to repeatedly.
A company emerges from Chapter 11 and its new equity begins trading. Why is this often mispriced, and what do you analyse?
A merger-arbitrage interview on legal optionality after a low-premium acquisition announcement.
A cash merger trades below the announced price and an investor proposes buying shares to pursue appraisal rights. How would you assess whether the legal route improves the risk-adjusted return?
A senior event-driven credit discussion testing whether you can analyse a liability-management transaction from both tendering and holdout perspectives.
An issuer offers unsecured bondholders $70 of new secured notes for every $100 principal tendered. If at least 90% tender, non-tendering bonds will be structurally subordinated and you estimate their recovery at $25; if…
A special-situations case that tests whether an analyst can value a binary post-close claim rather than quote its headline payout.
A target will be acquired for $40 cash plus one non-tradeable CVR. The CVR pays $10 if the FDA approves its lead drug by December 31 next year and pays zero otherwise. The target trades at $43.20; the stand-alone break…
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.