LBO and M&A interview questions

Q: Why would one company acquire another?

A strong answer covers: Cost and revenue synergies; Market share, new geographies, products or capabilities; Vertical integration, defensive reasons, using excess cash.

Q: What is a control premium, and what range is typical?

A strong answer covers: Premium over the unaffected share price paid to gain control; Often around 20-40% for public targets, but varies; Justified by synergies and the ability to change strategy.

Q: Why does using more debt increase returns in an LBO?

A strong answer covers: Less equity needed, so the same gain is a bigger return on equity; Debt is cheaper than equity and interest is tax-deductible; It also amplifies risk and losses if performance falls.

Paper LBOs, returns drivers, accretion and dilution, synergies and how deals are financed.

20 questions

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James · Interviewer · Demo interview in English.

Why would one company acquire another?

Questions are shown in English, as they are asked in London. You can practise every one of them in English, Spanish, French, German or Italian.

LBO & M&A

1Why would one company acquire another?Core

What a strong answer covers

Cost and revenue synergies
Market share, new geographies, products or capabilities
Vertical integration, defensive reasons, using excess cash

2What is a control premium, and what range is typical?Core

What a strong answer covers

Premium over the unaffected share price paid to gain control
Often around 20-40% for public targets, but varies
Justified by synergies and the ability to change strategy

3Why does using more debt increase returns in an LBO?Core

What a strong answer covers

Less equity needed, so the same gain is a bigger return on equity
Debt is cheaper than equity and interest is tax-deductible
It also amplifies risk and losses if performance falls

4What is the difference between a strategic buyer and a financial buyer?Core

What a strong answer covers