Investment Banking
4 accretion / dilution questions of the kind asked in investment banking interviews. Each carries a model answer, the concepts a complete response must hit, and graded feedback on your own attempt.
Expect this as a rapid mental-math question with no calculator.
Company A trades at 20x P/E and acquires Company B at 15x P/E in an all-stock deal, with no synergies. Is the deal accretive or dilutive? Explain the rule and its limits.
Standard for M&A groups. The model behind the question every banker is asked.
An acquirer is buying a target in a 50% cash / 50% stock deal. Build the pro forma EPS. The cash portion is funded with new debt at the stated rate; the stock portion is funded by issuing acquirer shares at the…
A quantitative follow-up that appears frequently in superdays.
An acquirer's deal is $40m dilutive to net income on a pro forma basis. The acquirer's tax rate is 25%. How much in pre-tax synergies are needed to break even? Then explain how you'd assess whether that number is…
An M&A associate review exercise built around finding linked errors rather than building from a blank page.
A first-year analyst sends you a merger model and draft client page forty minutes before the internal review. Find every issue that can change the recommendation, decide what must be fixed first, and write the review…
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.