Discover a list of typical questions that recruiters ask in M&A interviews!

We often receive requests for examples of typical questions you might be asked in an interview. Indeed, recruiters are looking for your ability to think and analyze. This involves situational and quick thinking questions. Usually, situational questions are based on a case study that is provided to you at the time of the interview. Discover the different questions you need to know answers to!

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1) Why was this company targeted for acquisition? What is it about this company that attracts you?

The answer to this question can usually be found in the teaser that was provided to potential buyers by the sell-side investment bank. Indeed, the financial performance indicators are mandatory in this document. They are supposed to explain to the potential buyers the opportunities that the selling company represents. You should therefore find the answers to this question in the document. If you don't have it, you can look at the financial statements and quickly analyze the CAPEX of the last few years as well as the NWC to see if the company represents good development opportunities.   

2) What are the potentials return from the synergies and economies of scale associated with this acquisition? 

To answer this question, you need to see if the sum of the value of the business being sold and the potential buyer is greater than that of the two separate businesses. One way to do this is to look at the D&A and OPEX costs of each of the two businesses. In the case of two companies in the same field, the economies of scale can be considerable. Indeed, logistics and production costs can be reduced by linking the two systems of each company. 

In the case of synergies, value can be created upstream. Savings will therefore be made at the supplier level. Indeed, a supplier necessarily takes a margin; by acquiring the supplier, the company will no longer pay this margin and will therefore be able to make savings of nearly 20 or 30% (depending on the sector).

3) In your opinion, what are the risks related to this acquisition? (Regulatory, financial, corporate culture risks, etc.)

This question depends very much on the sector in which the two companies involved in the acquisition operate. There are numerous standards and regulations to be taken into account depending on the sector. It is therefore impossible to give a global answer to this question. 

As far as corporate culture is concerned, the challenge will be mainly to integrate the newcomers into the already established teams of the acquiring company. 

In terms of financial risks, this is related to the question of financing the acquisition. It will be necessary to analyze the various financial ratios of the company before the purchase and to see how the type of financing chosen will impact the equity and the level of self-financing. 

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4) How might the buyer finance the acquisition? What impact will this decision have on the company's financial ratios? 

To answer this question, you need to check your equity and your self-financing and repayment capacity. Indeed, it is often necessary to take on debt, which is called a Leveraged Buy-Out (LBO). In this case, the increase of the debt will have an impact on the balance sheet of the acquiring company and will notably impact its self-financing capacity. 

You must be able to cite these different elements to answer the question and to add concrete figures and calculations if you have the company's accounting documents. 

5) How do you assess the future growth opportunities associated with this acquisition?

To answer this question, you will first need to mention the topics of acquisition opportunities and synergies as discussed above. Then you will need to make a 5-7 year projection of your ROI expectations. There are different methods. You can add up the valuation of the purchased company using the DCF method and your financial projections on the purchasing company. However, this method is rather restrictive and does not take into account the financial returns of the synergy. You will therefore have to adapt your answer according to the company being sold. 

6) How will you manage the risks related to the sustainability of the acquisition over the long term? 

To answer this question, you must consider all of a company's SD and ESG criteria. You must therefore consider the environmental aspect, but also the social and governance aspects. What will happen to the employees of the acquired company? Will they be fire and replace by employees of the acquiring company? Will they have to be relocated and integrated into the acquiring company's teams? These questions are often asked by the head of the company being sold, so you need to be able to discuss these issues with the buying company to answer them. 

You must also consider environmental issues, especially if one of the two companies is more developed than the other. Labels and standards must then be harmonized. Other more specific considerations must be addressed if the companies are involved in the energy sector or other highly polluting fields. 

Finally, the subject of corporate governance must also be addressed. In most cases, the head of the company leaves the company at the time of a sale. However, the managers and other members of the management team are still present. What will happen to them? Will they join the management of the merged company? Will they report to a manager of the buying company? Will they simply be laid off? All of this must be considered as well. 

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