m&a case study

Hacking the Case Interview

Merger & acquisition (M&A) cases are a common type of case you’ll see in consulting interviews. You are likely to 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.

These cases are fairly straight forward and predictable, so once you’ve done a few cases, you’ll be able to solve any M&A case.

In this article, we’ll cover:

• Two types of merger & acquisition case interviews
• The five steps to solve any M&A case
• The perfect M&A case interview framework
• Merger & acquisition case interview examples
• Recommended M&A case interview resources

If you’re looking for a step-by-step shortcut to learn case interviews quickly, enroll in our case interview course . These insider strategies from a former Bain interviewer helped 30,000+ land consulting offers while saving hundreds of hours of prep time.

Two Types of Merger & Acquisition Case Interviews

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 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’s assets and liabilities.

There are two types of M&A cases you’ll see in consulting case interviews:  

A company acquiring or merging with another company

• A private equity firm acquiring a company, also called a private equity case interview

The first type of M&A case is the most common. A company is deciding whether to acquire or merge with another company.

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
• Diversify sources of revenue

A private equity firm acquiring a company

The second type of M&A case is a private equity firm deciding whether to acquire a company. This type of M&A case is slightly different from the first type because private equity firms don’t operate like traditional businesses.

Private equity firms are investment management companies that 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 it was originally purchased 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 a 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
• 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.

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 making 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
• 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 a M&A framework and work through the case

With the specific goal or target in mind, structure a framework to help guide you through the case. Your framework should include all of the 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 in the next section of the article, but to summarize, there are four major areas in your framework:

Market attractiveness : Is the market that the acquisition target plays in attractive?

Company attractiveness : Is the acquisition target an attractive company?

Synergies : Are there significant revenue and cost synergies that can be realized?

Financial implications : What are the expected financial gains or return on investment from this acquisition?

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 the acquisition or recommending not making the acquisition.

If you are 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 are leaning towards NOT recommending making the acquisition…

Consider other potential acquisition targets.

Remember that there is always an 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 the 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
• Propose potential next steps to explore

The Perfect M&A Case Interview Framework

The perfect M&A case 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.

1. 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?
• How high are barriers to entry?

2. 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?
• Does the company have significant differentiation from competitors?

3. 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
• Cost synergies

Revenue synergies help the company increase revenues. Examples of revenue synergies include accessing new distribution channels, accessing new customer segments, cross-selling products, up-selling products, and bundling products together.

Cost synergies help the company reduce overall costs. Examples of cost synergies include consolidating redundant costs and having increased buyer power.

4. 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?
• What is the projected return on investment?

Merger & Acquisition Case Interview Examples

Let’s put our strategy and framework for M&A cases into practice by going through an example.

M&A case example: Your client is the second largest fast food restaurant chain in the United States, specializing in serving burgers and fries. As part of their growth strategy, they are considering acquiring Chicken Express, a fast food chain that specializes in serving chicken sandwiches. You have been hired to advise on whether this acquisition should be made.

To solve this case, we’ll go through the five steps we outlined above.

The case mentions that the acquisition is part of the client’s growth strategy. However, it is unclear what kind of growth the client is pursuing.

Are they looking to grow revenues? Are they looking to grow profits? Are they looking to grow their number of locations? We need to ask a clarifying question to the interviewer to understand the reason behind the potential acquisition.

Question: Why is our client looking to make an acquisition? Are they trying to grow revenues, profits, or something else? 

Answer: The client is looking to grow profits.

Now that we understand why the client is considering acquiring Chicken Express, we need to quantify what the specific goal or target is. Is there a particular profit number that the client is trying to reach?

We’ll need to ask the interviewer another question to identify this.

Question: Is there a specific profit figure that the client is trying to reach within a specified time period?

Answer: The client is trying to increase annual profits by at least $200M by the end of the first year following the acquisition.

With this specific goal in mind, we need to structure a framework to identify all of the important and relevant areas and questions to explore. We can use market attractiveness, company attractiveness, synergies, and financial implications as the four broad areas of our framework.

We’ll need to identify and select the most important questions to answer in each of these areas. One potential framework could look like the following:

Let’s fast forward through this case and say that you have identified the following key takeaways from exploring the various areas in your framework:

• Chicken Express has been growing at 8% per year over the past five years while the fast food industry has been growing at 3% per year
• Among fast food chains, Chicken Express has the highest customer satisfaction score
• Revenue synergies would increase annual profit by $175M. This is driven by leveraging the Chicken Express brand name to increase traffic to existing locations
• Cost synergies would decrease annual costs by $50M due to increased buyer power following the acquisition

At this point, we are leaning towards recommending that our client acquire Chicken Express. To strengthen our hypothesis, we need to explore the potential risks of the acquisition.

Can the two companies be integrated smoothly? Is there a risk of sales cannibalization between the two fast food chains? How will competitors react to this acquisition?

For this case, let’s say that we have investigated these risks and have concluded that none of them pose a significant threat to achieving the client’s goals of increasing annual profit by $200M.

We’ll now synthesize the work we have done so far and provide a clear and concise recommendation. One potential recommendation may look like the following:

I recommend that our client acquires Chicken Express. There are three reasons that support this.

One, Chicken Express is an attractive acquisition target. They are growing significantly faster than the fast food industry average and have the highest customer satisfaction scores among fast food chains.

Two, revenue synergies would increase annual profit by $175M. The client can leverage the brand name of Chicken Express to drive an increase in traffic to existing locations.

Three, cost synergies would decrease annual costs by $50M. This is due to an increase in buyer power following the acquisition.

Therefore, our client will be able to achieve its goal of increasing annual profits by at least $200M. For next steps, I’d like to assess the acquisition price to determine whether it is reasonable and fair.

More M&A case interview practice

Follow along with the video below for another merger and acquisition case interview example.

For more practice, check out our article on 23 MBA consulting casebooks with 700+ free practice cases .

In addition to M&A case interviews, we also have additional step-by-step guides to: profitability case interviews , market entry case interviews , growth strategy case interviews , pricing case interviews , operations case interviews , and marketing case interviews .

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Mergers and Acquisitions Examples: The largest company M&A deals list

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

This post was originally published on August 2019 and has been updated for relevancy on May 2, 2024.

When it comes to mergers and acquisitions, bigger doesn’t always mean better - the examples we included in our list of the biggest M&A failures is evidence of that.

In fact, all things being equal, the bigger a deal becomes, the bigger the likelihood that the buyer is overpaying for the target company. But whether you like mega deals or not, we cannot afford to ignore them. 

At DealRoom , we help companies evolve and streamline multiple large and successful M&A deals each year. In this article, we collected some of the biggest deals in history.

Related: Recent M&A Deals and 8 Biggest M&A Deals in History (so far) and 8 Biggest Upcoming M&A Deals in 2023 (so far)

Biggest mergers and acquisitions examples list.

Reading this list, it can seem that the biggest deals are doomed to failure (at least from the perspective of their shareholders). But thankfully, that just isn’t the case. Some of the biggest M&A transactions of the past 30 years have been outstanding successes.

Many of these deals have achieved what they set out to do at the outset - to reshape industries on the strength of a single deal.

With that in mind, let's take a closer look at 25 companies that recorded the largest mergers and acquisitions in history.

1. Vodafone and Mannesmann (1999) - $202.8B ($373B adjusted for inflation)

As of March 2024, the takeover of Mannesmann by Vodafone in 2000 was still one of the largest acquisitions ever made. Worth ~ $203 billion at that time, Vodafone, a mobile operator based in the United Kingdom, acquired Mannesmann, a German-owned industrial conglomerate company.

This deal made Vodafone the world’s largest mobile operator and set the scene for dozens of mega deals in the mobile telecommunications space in the years that followed. This deal is still considered as the biggest acquisition in history.

2. Shenhua Group and China Guodian Corporation (2017) - $278B ($354B adjusted for inflation)

The merger between Shenhua Group and China Guodian Corporation is the biggest example of a merger of equals that happened in 2017. Shenhua Group is China’s largest coal provider, while China Guodian Corporation is one of the top five electricity producers.

This $278 billion merger created the world’s largest power utility company by installed capacity. The goal of the merger was to create a balanced energy portfolio between coal power and renewable energy. This is to align with China’s broader environmental and economic objectives .

3. AOL and Time Warner (2000) - $182B ($325B adjusted for inflation)

When we mentioned at the outset of this article that ‘ big doesn’t always mean better ’, the famous merger of AOL, a U.S.-based internet service provider, and Time Warner, an American cable television company, in 2000 is a case in point. 

In little over two decades, the deal has become cemented as the textbook example of how not to conduct mergers and acquisitions. It featured everything from overpaying to strong cultural differences and even, with the benefit of hindsight, two large media companies who just weren’t sure where the media landscape was headed. 

The merger's valuation came crashing down after the dot-com bubble burst just two months after the deal was signed. The deal, which is to be known as the largest merger in history, fell apart in 2009, 9 years later after it was originally signed.

4. ChemChina and Sinochem (2018) - $245B ($309B adjusted for inflation)

The ChemChina and Sinochem merger was part of the Chinese government’s bigger plan to strengthen their competitiveness in the global stage by reducing the overall number of its state-owned enterprises through merging its biggest companies to create a larger firm.

This specific merger created the world’s largest industrial chemicals company, known as Sinochem Holdings, which surpassed major global competitors like BASF in North America in terms of scale and market presence.

5. Gaz de France and Suez (2007) - $182B ($259B adjusted for inflation)

France loves its national champions - the large French companies that compete on a world stage, waving the tricolor. It was no surprise then, when Nicholas Sarkozy, President of France in 2007, stepped in to save this merger.

That’s right - a President playing the role of part-time investment banker. These days, Suez is one of the oil and gas ‘majors’, although the fact that the company’s share price hovers very close to where it was a decade and a half ago tells us everything of what investors thought of the deal.

The deal, one of the biggest mergers ever in energy, created the world’s fourth largest energy company and Europe’s second largest electricity and gas group. The merged companies created a diversified, flexible energy supply stream with a high-performance electricity production base.

6. Glaxo Wellcome and SmithKline Beecham merger (2000) - $107B  ($197B adjusted for inflation)

The merger of the UK’s two largest pharmaceutical firms in 2000 led to what is currently the 6th largest pharmaceutical firm in the world, and the only British firm in the top 10.

However, like several deals on this list, it wasn’t received particularly well by investors and at the time of writing is trading at about 25% less than the time of the merger.

This, and a range of bolt-on acquisitions in the consumer space over the past decade, may explain why the company is planning to split into two separate companies in the coming years.

7. Verizon and Vodafone (2013) - $130B ($173B adjusted for inflation)

Vodafone has been involved in so many transactions over the past 20 years that they should be getting quite efficient at the process at this stage. The $130B deal in 2013 allowed Verizon to pay for its US wireless division.

At the time, the deal was the third largest in history - two of which Vodafone had partaken in. From Verizon’s perspective, it gave the company full control over its wireless division, ending an often fraught relationship with Vodafone that lasted for over a decade, and also allowed it to build new mobile networks and contend with an increasingly competitive landscape at the time.

From Vodafone's point of view, the acquisition cut the company value roughly in half, to $100 billion. The business acquisition also moved Vodafone from the second largest phone company in the world down to fourth, behind China Mobile, AT&T, and Verizon.

8. Dow Chemical and DuPont merger (2015) - $130B ($166B adjusted for inflation)

When Dow Chemical and DuPont announced they were merging in 2015, everyone sat up and took notice; the merger of equals would create the largest chemicals company by sales in the world, as well as eliminate the competition between them, making it a picture-perfect example of horizontal merger.

Shortly after the deal was completed, in 2018, the company was already generating revenue of $86B a year - but it didn’t last long: In 2019, management announced that the merged company would spin off into three separate companies, each with a separate focus.

9. United Technologies and Raytheon (2019) - $121B ($147B adjusted for inflation)

The merger between United Technologies Corporation (UTC) and Raytheon Company created Raytheon Technologies, an aerospace and defense giant. The new legal entity is expected to be the leader in aerospace and defense industries, with a broadened portfolio and enhanced market reach.

Now that the deal went through, Raytheon can leverage United Technologies' expertise in high temperature materials for jet engines; and in directed energy weapons, United Technologies has relevant power generation and management technology.

So far, however, investors seem less convinced with the company’s share price taking a dip of around 25% straight after the deal closed.

10. AB InBev and SABMiller merger (2015) - $107B  ($138B adjusted for inflation)

If stock price is any indication of whether a deal was successful or not, then the creation of AmBev through the merger of InBev and SABMiller in 2015 certainly wasn’t.

On paper, the deal looked good - two of the world’s biggest brewers bringing a host of the world’s favorite beers into one stable.

There was just one problem - they didn’t foresee the rise of craft beers and how it would disrupt the brewing industry. Several bolt-on acquisitions of craft brewers later and the new company may finally be on track again.

11. AT&T and Time Warner (2018) - $108B ($134B adjusted for inflation)

Not only did the proposed merger of AT&T and Time Warner draw criticism from antitrust regulators when it was announced, it also brought back memories of the previous time Time Warner had been involved in a megadeal.

With the best part of two decades to learn from its mistake, and AT&T a much bigger cash generator than AOL, this deal looks like it has been better thought through than the deal that preceded it.

12. Heinz and Kraft merger (2015) - $100B  ($131B adjusted for inflation)

The merger of Heinz and Kraft - to create the Kraft Heinz Company - is yet another megadeal that has a detrimental effect on stock.

The deal has been called a “ mega-mess ,” with billions knocked off the stock price since the deal closed. One of the reasons has been allegations made about accounting practices at the two firms before the merger.

Another reason has been zero-based budgeting (ZBB), a strict cost cutting regime that came at a time when old brands needed to be refreshed rather than have their budgets cut back.

13. BMO Financial Group and Bank of the West (2021) - $105B ($119.5B adjusted for inflation)

On December 20, 2021, BMO Financial Group announced the acquisition of BNP Paribas SA unit Bank of the West and its subsidiaries with assets worth approximately $105B. This merger is expected to significantly expand BMO’s presence in the U.S.

Through this acquisition, BMO can expand their customer base, increase their market presence in new regions, and enhance their existing capabilities with complementary products and services offered by Bank of the West.

14. Bristol-Myers Squibb and Celgene merger (2019) - $95B  ($115B adjusted for inflation)

Despite the massive size of the transaction, this 2019 megadeal wasn’t a “merger of equals.” Instead, Celgene became a subsidiary of Bristol-Myers Squibb. The deal brings together two of the world’s largest cancer drug manufacturers, so hopefully the deal amounts to something much greater than the sum of the parts.

15. Energy Transfer Equity and Energy Transfer Partners (2018) - $90B  ($111B adjusted for inflation)

This deal is part of a strategic initiative to simplify Energy Transfer Equity’s corporate structure and streamlining their operations.​

Each ETP unit was converted into 1.28 ETE units, resulting in a major redistribution of shares but keeping the business essentially continuous under a new name. 

ETE was renamed Energy Transfer LP and began trading under the ticker symbol "ET" on the New York Stock Exchange. On the other hand, ETP was renamed Energy Transfer Operating L.P.

16. Unilever plc and Unilever N.V. (2020) - $81B  ($97B adjusted for inflation)

The M&A deal between Unilever plc and Unilever N.V. in 2020 was essentially a unification strategy. The primary goal was to create a more cohesive organization with streamlined operations and increased strategic flexibility. 

During this process, they made sure nothing will change in their operations, locations, activities or staffing levels in either The Netherlands or the United Kingdom.

17. Walt Disney and 21st Century Fox (2017) - $52.4B ($83.7B adjusted for inflation)

In December 2017, The Walt Disney Company acquired 21st Century Fox. Walt Disney’s goal was to boost their global presence and content diversity, adding to its strong franchise and streaming service portfolio. This acquisition enhanced Disney’s entertainment library and direct-to-consumer streaming offerings, bringing franchises like X-Men and Deadpool under one roof.

18. Bayer and Monsanto (2018) - $63B ($78B adjusted for inflation)

The deal between Bayer and Monsanto worth approximately $63B created one of the world's biggest agrochemical and agricultural biotechnology corporations. Bayer was known widely for its pharmaceutical division, but it also has a substantial crop science division, where they offer chemical and crop protection. 

Through the Monsanto acquisition, Bayer has strengthened their agricultural business using Monsanto’s expertise, which ultimately made them a global leader in seeds, traits, and agricultural chemicals.

After the completion of the deal in 2018, the integration has been complex due to the legacy issues inherited from the acquisition of Monsanto, such as culture, reputation, and legal and regulatory issues.

19. Microsoft and Activision Blizzard (2023) - $75.4B ($76.5B adjusted for inflation)

On January 18, 2022, Microsoft announced its intent to acquire Activision Blizzard, initially valued at $68.7B. The goal of this strategic acquisition was to significantly boost its gaming segment across various platforms including mobile, PC, console, and cloud. 

Microsoft can do this by integrating Activision Blizzard's strong portfolio of popular gaming franchises like Call of Duty, World of Warcraft, and Candy Crush. After overcoming numerous regulatory challenges, the deal was finalized on October 13, 2023. 

This acquisition, with the total cost amounting to $75.4 billion, represents one of the largest deals in the video game industry.

20. Broadcom and VMWare (2023) - $61B ($62B adjusted for inflation)

In November 2023, Broadcom acquired VMWare to strengthen its infrastructure software business by integrating VMWare’s extensive multi-cloud services capabilities. 

Due to the large scale of both companies’ operations, the deal had to go through a massive regulatory scrutiny and review. It involved multiple jurisdictions across the globe to assess its impact on competition and market dynamics within the tech industry.

21. Exxon Mobil and Pioneer Natural Resources (2023) - $59.5B ($60B adjusted for inflation)

As part of their strategy to enhance their production capabilities and market presence in the oil and gas industry, Exxon Mobil merged with Pioneer Natural Resources. 

They announced this deal in October 2023, with the goal to achieve a partnership that would combine their strengths in terms of resources and strengthen their portfolio in the global energy market. 

ExxonMobil’s Senior Vice President, Niel Chapman, reaffirms that the deal is still on track and is set to close in the second quarter of 2024.

22. S&P Global and IHS Markit (2020) - $44B ($52.8B adjusted for inflation)

S&P Global announced an all-stock merger with IHS Markit worth $44 billion in November 2020. Through this deal, S&P Global will gain access to a data provider that supplies financial information to 50,000 customers across business and governments. Both companies expected a generated annual free cash flow of exceeding $5bn by 2023.

23. Discovery, Inc. and WarnerMedia (2022) - $43B ($46B adjusted for inflation)

On April 8, 2022, Discovery Inc. and WarnerMedia finalized a merger that would enhance their global media and entertainment footprint. The goal was to combine Warnermedia’s extensive entertainment assets with Discovery's non-fiction and international entertainment.

This $43B deal formed a new entity called Warner Bros. Discovery, which now has a vast portfolio that includes networks such as CNN, HBO, and Discovery Channel, as well as streaming services like HBO Max and Discovery+.

This horizontal merger boosted the newly formed company to compete with other major players like Netflix and Disney+ by providing a richer diversity of content across genres.

24. Pfizer and Seagen (2023) - $43B ($43.7B adjusted for inflation)

Pfizer’s acquisition of Seagen for $43B in March 2023 marked one of the largest deals in the biopharmaceutical sector since 2019.

Since Seagen is a biotech company known for its expertise in developing antibody-drug conjugates (ADCs) and other innovative cancer therapies, this acquisition will strengthen Pfizer’s oncology portfolio and expand their presence in the cancer treatment market.

25. Altimeter and Grab Holdings (2021) - $40B ($46.7B adjusted for inflation)

Altimeter’s stock-for-stock merger with Grab Holdings marked as the largest de-SPAC transaction at that time, worth approximately $40B. 

Instead of a traditional IPO process, Altimeter helped Grab go public through a reverse merger. The primary motive of the deal was to boost Grab's dominance in Southeast Asia by providing them with additional capital to propel their expansion and face their fierce competition, particularly Gojek.

It's a win-win move for Altimeter because the merger carved an opportunity for them to invest in a fast-growing tech company with a solid market presence in a rapidly developing region.

Merger examples

A merger is a transaction of two companies, usually of similar size, mutually agreeing to combine their businesses into one entity. 

This is distinct from an acquisition , where one company (the buyer) buys the outstanding shares of a target company, and the target company’s shareholders receive the proceeds from selling those shares.

Here are a few examples of mergers that have happened in the M&A landscape:

Exxon Mobil and Pioneer Natural Resources (2023) - $59.5B ($60B adjusted for inflation)

This is a great example of a merger of equals where no payment was made from one company to another. This was an all-stock transaction, where Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing.

United Technologies and Raytheon (2019) - $121B ($147B adjusted for inflation)

Another classic example of a so-called “ merger of equals .” The United Technologies and Raytheon merger is also an all-stock transaction, where Raytheon shareholders receive shares in the new company, while UTC shareholders maintain a majority stake.

Discovery, Inc. and WarnerMedia (2022) - $43B ($46B adjusted for inflation)

Despite the first two examples mentioned above, not all mergers involve two equal-sized companies. When AT&T owned WarnerMedia, they merged it with a smaller company, Discovery Inc. This special kind of deal is called a Reverse Morris Trust. So even though it's a merger, AT&T got $40.4 billion in cash as a payment. 

This payment was part of the deal to help balance things out between what AT&T was giving up and what they were getting in return. AT&T shareholders also ended up owning a big part of the combined company.

Acquisition example

An acquisition is a transaction whereby companies, organizations, and/or their assets are acquired for some consideration by another company. The motive for one company to acquire another is nearly always growth. 

In the next section, let’s take a look at great acquisitions examples that have happened in M&A history.

Microsoft and Activision Blizzard (2022) - $75.4B ($76.5B adjusted for inflation)

This is an example of an outright acquisition. In December 2021, Blizzard faced allegations and a lawsuit regarding workplace misconduct, specifically discrimination against women employees. Their reputation and business operations were taking a hit, and they wanted an out. 

Meanwhile Microsoft wanted Activision's iconic franchises like “Call of Duty” and “World of Warcraft” to increase their presence in the gaming industry. Activision saw Microsoft’s acquisition as a way to address internal issues under new leadership, while Microsoft potentially expanding its footprint in the gaming industry.

Walt Disney and 21st Century Fox (2017) - $52.4B ($83.7B adjusted for inflation)

Another classic example of an acquisition is the Walt Disney and 21st Century Fox deal. During this time, the media landscape was rapidly changing and traditional media companies like 21st Century Fox were facing significant competition from new digital entrants like Netflix and Amazon. Fox wanted to sell their company to focus on their core strengths, primarily news and sports. 

On the other hand, Walt Disney had better content creation and distribution, which allowed them to benefit from this transaction.

Amazon and Whole Foods (2017) - $13.7B ($17B adjusted for inflation)

Though this deal did not make our top 25, it’s certainly a great example of a successful acquisition. Amazon bought Whole Foods in 2017 for approximately $13.7B to have greater control of their supply chain and broaden their reach into new markets. 

Before this deal, Amazon was more focused on e-commerce. This strategic move allowed them to expand into the brick-and-mortar grocery sector, through Whole Foods. Amazon was able to integrate its e-commerce capabilities with Whole Foods' physical store network and achieved economies of scale in several areas, especially in distribution and logistics.

Lessons from successful and failed mergers and acquisitions 

Whether it’s a success or failure, there are always lessons to be learned in the world of mergers & acquisitions. Here are some of the best lessons we want to emphasize and share.

Don’t overlook culture 

In the past, culture was one of the most underrated aspects of M&A. No one cared about it, and deal makers were only focused on the numbers and synergies. Today, practitioners are catching on, and they tend to focus more on culture during due diligence. But for those who are still not believers, you can always look up the Daimler Benz and Chrysler deal back on May 7, 1998. 

Daimler was aggressive during integration and Chrysler didn’t want to be told what to do. They didn’t get along and continued to run as separate operations. The entire deal was a disaster, which eventually led to Daimler Benz selling Chrysler to the Cerberus Capital Management firm.

Don’t take due diligence for granted

M&A teams must never take due diligence for granted and turn every possible stone. One mistake can cause massive headaches, and potentially destroy the acquiring company.  HP learned this the hard way when they acquired Autonomy back in 2011. The plan was to transform HP from a computer and printer maker into a software-focused enterprise services firm. 

The problem came after the deal was closed, and HP discovered that Autonomy was cooking the books by selling hardware at a loss to its customers while booking the sales as software licensing revenue. This is one of the most controversial deals of all time, generating massive lawsuits due to fraudulent accounting practices.

Plan for integration early in the process

The biggest mistake any practitioner could make is not planning for integration early in the M&A process . Integration is where value is created, and must be prioritized during due diligence. 

The Sprint and Nextel Communications deal back in 2005 is a great example of the importance of integration planning. The combination of these two legal entities created the third largest telecommunications provider at that time. The goal is to gain access to each other's customer bases and cross sell their product lines. 

However due to the lack of integration planning during the diligence they were not prepared for what was about to come after closing. Apparently the two companies' networks did not share the same technology and had zero overlap making integration extremely difficult. They also lost a significant amount of market share due to their clashing marketing strategies that allowed rivals to steal dissatisfied customers.

Final thoughts

Overall, it’s hard to argue which deal in US history is the most successful merger or acquisition due to the fact that sometimes the full value and potential of a deal takes years to formulate.

However, the top mergers and acquisitions take into account best practices such as robust communication, focus on the strategic goal/deal thesis, and early integration planning throughout the deal lifecycle.

Much can be learned from companies that have successfully merged with or acquired other companies.

The right technology and tools can also work to make deals more successful. The DealRoom M&A Optimization Platform aims to help teams manage their complex M&A transactions.

Whether teams need deal management software, due diligence process assistance, help with their post merger (PMI) process , or just a simple VDR, our platform provides the necessary technology and features to optimize M&A processes.

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Breaking down the M&A Case Study

• Post author By Jason Oh
• Post date October 26, 2019
• No Comments on Breaking down the M&A Case Study

M&A case framework

Now that you have a high-level understanding of why companies buy each other in the first place (refer to M&A deals – benefits and drawbacks ), let’s discuss the framework you should use to analyze the transaction.

Firms typically look at four areas when working on M&A cases. Let’s step through them one by one and list the questions you’d want to answer in each.

1. The market

The first area consultants typically analyze in M&A cases is the market. This is extremely important because a big part of the success or failure of the acquisition will depend on broader market dynamics. Here are some of the questions you could dive into:

• Are both companies (buyer / target) in the same markets (e.g. geographies, customers, etc.)?
• How big is the market? And how fast is it growing?
• How profitable is the market? And is its profitability stable?
• How intense is the competition? Are there more and more players? Are there barriers to entry?
• How heavily regulated is the market?

2. The target

The second important area to analyze is the company you are thinking of acquiring (i.e. the target). Your overall objective here will be to understand how attractive it is both financially and strategically.

• What is the current and future financial position of the target? Is it under / overvalued?
• Does the target own any assets (e.g. technology, brands, etc.) or capabilities (e.g. manufacturing know-how, distribution channels, etc.) that are strategically important to the buyer?
• What’s the quality of the current management? Do we believe we can add value by getting control and running the company better?
• Is the target company’s culture very different? If so, are we confident it could still integrate well with the buyer?

3. The buyer

The third area consultants typically analyze is the buyer (i.e. the company buying the target). It is important to have a good understanding of what’s motivating the purchase of the target and whether the buyer has adequate financial resources.

• What’s the acquisition rationale? Undervaluation, control, synergies or a combination?
• Can the buyer easily finance the acquisition? Or will it need to borrow money?
• Does the buyer have any experience in integrating companies? Was it successful in the past?
• Is this the right time for the buyer to acquire another player? Does it risk losing focus?

4. Synergies and risks

The last area to analyze is the synergies and risks related to the acquisition. This is usually the hardest part of the analysis as it is the most uncertain.

• What is the value of the individual and combined entities?
• Are there cost synergies (e.g. duplication of roles, stronger buying power, etc.)?
• Are there revenue synergies (e.g. product cross-selling, using one company’s distribution channels for the other company’s products, etc.)?
• What are the biggest risks that could make the acquisition fail (e.g. cultural integration, regulation, etc.)?

It is almost impossible to cover all these aspects in a 30-60 minutes case interview. Once you have laid out your framework, your interviewer will typically make you focus on a specific area of the framework for the rest of the case. This is usually the market, or the target company, but can sometimes be the other two points.

M&A Case Examples

Ok, now that you know how to analyze M&A situations, let’s step through a few real life examples of acquisitions and their rationale. For each example, you should take a few minutes to apply the framework you’ve just learned and try to identify the driving reason for the M&A. Once you have done that, you can then read the actual acquisition rationale.

1. IBM Acquisition

• Situation #1: At the beginning of the 2010s, IBM went on an acquisition spree and purchased 40+ companies over 3 years for an average of $350 million each. All these companies had smaller scale than IBM and slightly different technology.
• Rationale:  The main reason IBM decided to buy these 40+ companies is that they could all benefit from the firm’s global sales force. Indeed IBM has a presence in the largest software markets in the world (e.g. North America, Europe, etc.) that smaller companies just don’t have. IBM estimates that thanks to its footprint it could accelerate the growth of the companies it purchased by more than 40% over the two years following the acquisition in some cases. This is a typical revenue synergy resulting from the buyer’s ability to use its distribution channels.

2. Apple Acquisition

• Situation #2: In 2010, Apple decided to buy Siri , its now famous voice assistant. And in 2014, it decided to purchase Beats Electronics which had just launched a music streaming business. Both acquisitions were motivated by similar reasons.
• Rationale: In both the Siri and Beats cases, Apple had the capabilities to develop the technology / product it was purchasing itself. It could have built its own voice assistant, and its own music streaming business. But it decided not to. The reason they thought it would be better to buy a competitor is that it was going to enable them to offer these solutions to their customers more quickly. To be more precise, they probably estimated that launching these products more quickly was worth more money than the savings they would make by developing the technology on their own. This is a typical revenue synergy that’s widespread in the technology space.

3. Volkswagen, Audi, and Porsche Merger

• Situation #3: Volkswagen, Audi and Porsche have been combined companies since 2012 . Mergers are common in the automotive industry and usually motivated by a central reason.
• Rationale: The cost to develop a new car platform is high. It takes years, hundreds of people and millions of dollars. By belonging to the same group, Volkswagen, Audi and Porsche can share car platforms and reuse them for different models with different brands. This is a typical cost synergy.

Jason Oh is a management consultant at Novantas with expertise in scaling profitability and improving business efficiency for financial institutions.

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Ace Your M&A Case Study Using These 5 Key Steps

• Last Updated November, 2022

Mergers and acquisitions (M&A) are high-stakes strategic decisions where a firm(s) decides to acquire or merge with another firm. As M&A transactions can have a huge impact on the financials of a business, consulting firms play a pivotal role in helping to identify M&A opportunities and to project the impact of these decisions. 

M&A cases are common case types used in interviews at McKinsey, Bain, BCG, and other top management consulting firms. A typical M&A case study interview would start something like this:

The president of a national drugstore chain is considering acquiring a large, national health insurance provider. The merger would combine one company’s network of pharmacies and pharmacy management business with the health insurance operations of the other, vertically integrating the companies. He would like our help analyzing the potential benefits to customers and shareholders.

M&A cases are easy to tackle once you understand the framework and have practiced good cases. Keep reading for insights to help you ace your next M&A case study interview.

In this article, we’ll discuss:

• Why mergers & acquisitions happen.
• Real-world M&A examples and their implications.
• How to approach an M&A case study interview.
• An end-to-end M&A case study example.

Let’s get started!

Why Do Mergers & Acquisitions Happen?

There are many reasons for corporations to enter M&A transactions. They will vary based on each side of the table. 

For the buyer, the reasons can be:

• Driving revenue growth. As companies mature and their organic revenue growth (i.e., from their own business) slows, M&A becomes a key way to increase market share and enter new markets.
• Strengthening market position. With a larger market share, companies can capture more of an industry’s profits through higher sales volumes and/or greater pricing power, while vertical integration (e.g., buying a supplier) allows for faster responses to changes in customer demand.
• Capturing cost synergies. Large businesses can drive down input costs with scale economics as well as consolidate back-office operations to lower overhead costs. (Example of scale economies: larger corporations can negotiate higher discounts on the products and services they buy. Example of consolidated back-office operations: each organization may have 50 people in their finance department, but the combined organization might only need 70, eliminating 30 salaries.)
• Undertaking PE deals. Private equity firms will buy a majority stake in a company to take control and transform the operations of the business (e.g., bring in new top management or fund growth to increase profitability).
• Accessing new technology and top talent. This is especially common in highly competitive and innovation-driven industries such as technology and biotech. 

For the seller, the reasons can be: 

• Accessing resources. A smaller business can benefit from the capabilities (e.g., product distribution or knowledge) of a larger business in driving growth.
• Gaining needed liquidity. Businesses facing financial difficulties may look for a well-capitalized business to acquire them, alleviating the stress.
• Creating shareholder exit opportunities . This is very common for startups where founders and investors want to liquidate their shares.

There are many other variables in the complex process of merging two companies. That’s why advisors are always needed to help management to make the best long-term decision.

Real-world Merger and Acquisition Examples and Their Implications

Let’s go through a couple recent merger and acquisition examples and briefly explain how they will impact the companies.

Nail the case & fit interview with strategies from former MBB Interviewers that have helped 89.6% of our clients pass the case interview.

KKR Acquisition of Ocean Yield

KKR, one of the largest private equity firms in the world, bought a 60% stake worth over $800 million in Ocean Yield, a Norwegian company operating in the ship leasing industry. KKR is expected to drive revenue growth (e.g., add-on acquisitions) and improve operational efficiency (e.g., reduce costs by moving some business operations to lower-cost countries) by leveraging its capital, network, and expertise. KKR will ultimately seek to profit from this investment by selling Ocean Yield or selling shares through an IPO.

ConocoPhillips Acquisition of Concho Resources

ConocoPhillips, one of the largest oil and gas companies in the world with a current market cap of $150 billion, acquired Concho Resources which also operates in oil and gas exploration and production in North America. The combination of the companies is expected to generate financial and operational benefits such as:

• Provide access to low-cost oil and gas reserves which should improve investment returns.
• Strengthen the balance sheet (cash position) to improve resilience through economic downturns.
• Generate annual cost savings of $500 million.
• Combine know-how and best practices in oil exploration and production operations and improve focus on ESG commitments (environmental, social, and governance).

How to Approach an M&A Case Study Interview

Like any other case interview, you want to spend the first few moments thinking through all the elements of the problem and structuring your approach. Also, there is no one right way to approach an M&A case but it should include the following: 

• Breakdown of value drivers (revenue growth and cost synergies) 
• Understanding of the investment cost
• Understanding of the risks. (For example, if the newly formed company would be too large relative to its industry competitors, regulators might block a merger as anti-competitive.) 

Example issue tree for an M&A case study: 

• Will the deal allow them to expand into new geographies or product categories?
• Will each of the companies be able to cross-sell the others’ products? 
• Will they have more leverage over prices? 
• Will it lower input costs? 
• Decrease overhead costs? 
• How much will the investment cost? 
• Will the value of incremental revenues and/or cost savings generate incremental profit? 
• What is the payback period or IRR (internal rate of return)? 
• What are the regulatory risks that could prevent the transaction from occurring? 
• How will competitors react to the transaction?
• What will be the impact on the morale of the employees? Is the deal going to impact the turnover rate? 

An End-to-end BCG M&A Case Study Example

Case prompt:

Your client is the CEO of a major English soccer team. He’s called you while brimming with excitement after receiving news that Lionel Messi is looking for a new team. Players of Messi’s quality rarely become available and would surely improve any team. However, with COVID-19 restricting budgets, money is tight and the team needs to generate a return. He’d like you to figure out what the right amount of money to offer is.

First, you’ll need to ensure you understand the problem you need to solve in this M&A case by repeating it back to your interviewer. If you need a refresher on the 4 Steps to Solving a Consulting Case Interview , check out our guide.

Second, you’ll outline your approach to the case. Stop reading and consider how you’d structure your analysis of this case. After you outline your approach, read on and see what issues you addressed, and which you didn’t consider. Remember that you want your structure to be MECE and to have a couple of levels in your Issue Tree .

Example M&A Case Study Issue Tree

• Revenue: What are the incremental ticket sales? Jersey sales? TV/ad revenues?
• Costs: What are the acquisition fees and salary costs? 
• How will the competitors respond? Will this start a talent arms race?  
• Will his goal contribution (the core success metric for a soccer forward) stay high?
• Age / Career Arc? – How many more years will he be able to play?
• Will he want to come to this team?
• Are there cheaper alternatives to recruiting Messi?
• Language barriers?
• Injury risk (could increase with age)
• Could he ask to leave our club in a few years?
• Style of play – Will he work well with the rest of the team?

Analysis of an M&A Case Study

After you outline the structure you’ll use to solve this case, your interviewer hands you an exhibit with information on recent transfers of top forwards.

In soccer transfers, the acquiring team must pay the player’s current team a transfer fee. They then negotiate a contract with the player.

From this exhibit, you see that the average transfer fee for forwards is multiple is about $5 million times the player’s goal contributions. You should also note that older players will trade at lower multiples because they will not continue playing for as long. 

Based on this data, you’ll want to ask your interviewer how old Messi is and you’ll find out that he’s 35. We can say that Messi should be trading at 2-3x last season’s goal contributions. Ask for Messi’s goal contribution and will find out that it is 55 goals. We can conclude that Messi should trade at about $140 million. 

Now that you understand the up-front costs of bringing Messi onto the team, you need to analyze the incremental revenue the team will gain.

Calculating Incremental Revenue in an M&A Case Example

In your conversation with your interviewer on the value Messi will bring to the team, you learn the following: 

• The team plays 25 home matches per year, with an average ticket price of $50. The stadium has 60,000 seats and is 83.33% full.
• Each fan typically spends $10 on food and beverages.
• TV rights are assigned based on popularity – the team currently receives $150 million per year in revenue.
• Sponsors currently pay $50 million a year.
• In the past, the team has sold 1 million jerseys for $100 each, but only receives a 25% margin.

Current Revenue Calculation:

• Ticket revenues: 60,000 seats * 83.33% (5/6) fill rate * $50 ticket * 25 games = $62.5 million.
• Food & beverage revenues: 60,000 seats * 83.33% * $10 food and beverage * 25 games = $12.5 million.
• TV, streaming broadcast, and sponsorship revenues: Broadcast ($150 million) + Sponsorship ($50 million) = $200 million.
• Jersey and merchandise revenues: 1 million jerseys * $100 jersey * 25% margin = $25 million.
• Total revenues = $300 million.

You’ll need to ask questions about how acquiring Messi will change the team’s revenues. When you do, you’ll learn the following: 

• Given Messi’s significant commercial draw, the team would expect to sell out every home game, and charge $15 more per ticket.
• Broadcast revenue would increase by 10% and sponsorship would double.
• Last year, Messi had the highest-selling jersey in the world, selling 2 million units. The team expects to sell that many each year of his contract, but it would cannibalize 50% of their current jersey sales. Pricing and margins would remain the same.
• Messi is the second highest-paid player in the world, with a salary of $100 million per year. His agents take a 10% fee annually.

Future Revenue Calculation:

• 60,000 seats * 100% fill rate * $65 ticket * 25 games = $97.5 million.
• 60,000 seats * 100% * $10 food and beverage * 25 games = $15 million.
• Broadcast ($150 million*110% = $165 million) + Sponsorship ($100 million) = $265 million.
• 2 million new jerseys + 1 million old jerseys * (50% cannibalization rate) = 2.5 million total jerseys * $100 * 25% margin = $62.5 million.
• Total revenues = $440 million.

This leads to incremental revenue of $140 million per year. 

• Next, we need to know the incremental annual profits. Messi will have a very high salary which is expected to be $110 million per year. This leads to incremental annual profits of $30 million.
• With an upfront cost of $140 million and incremental annual profits of $30 million, the payback period for acquiring Messi is just under 5 years.

Presenting Your Recommendation in an M&A Case

• Messi will require a transfer fee of approximately $140 million. The breakeven period is a little less than 5 years. 
• There are probably other financial opportunities that would pay back faster, but a player of the quality of Messi will boost the morale of the club and improve the quality of play, which should build the long-term value of the brand.
• Further due diligence on incremental revenue potential.
• Messi’s ability to play at the highest level for more than 5 years.
• Potential for winning additional sponsorship deals.

5 Tips for Solving M&A Case Study Interviews

In this article, we’ve covered:

• The rationale for M&A.
• Recent M&A transactions and their implications.
• The framework for solving M&A case interviews.
• AnM&A case study example.

Still have questions?

If you have more questions about M&A case study interviews, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them.

Other people prepping for mergers and acquisition cases found the following pages helpful:

• Our Ultimate Guide to Case Interview Prep
• Types of Case Interviews
• Consulting Case Interview Examples
• Market Entry Case Framework
• Consulting Behavioral Interviews

Help with Case Study Interview Prep

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Deciphering the M&A Case Study Framework: A Comprehensive Guide

Looking to master the art of M&A case study analysis? Look no further than our comprehensive guide! From understanding the key components of a successful framework to analyzing real-world case studies, this article has everything you need to become an expert in M&A strategy.

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Table of Contents

Mergers and acquisitions (M&A) are an essential aspect of the modern business world, where companies are looking for ways to expand their operations, increase their market share, and diversify their product offerings. M&A can take many forms, including mergers, acquisitions, joint ventures, and strategic alliances. This comprehensive guide aims to provide a detailed understanding of the M&A case study framework and the critical factors that influence the success of M&A transactions.

What is M&A and Why is it Important in Today's Business Landscape?

Mergers and acquisitions refer to the process of combining two or more companies or businesses. M&A is typically used as a growth strategy as it enables companies to expand their market share, reduce their costs, gain access to new technologies or products, and achieve economies of scale. M&A is also used as a way for companies to enter new markets, diversify their product offerings or strategic partnerships and collaborations.

M&A is a critical aspect of today's business landscape, as it enables companies to maximize value creation and improve their competitiveness in the global marketplace. Successful M&A transactions can lead to better financial performance, increased shareholder value, and enhanced market position.

However, M&A transactions can also be risky and complex, requiring careful planning, due diligence, and execution. Companies must consider various factors such as cultural differences, regulatory requirements, and potential legal issues that may arise during the process. Poorly executed M&A transactions can result in financial losses, damage to reputation, and even legal consequences.

Moreover, M&A activity is influenced by various external factors such as economic conditions, political instability, and technological advancements. For instance, the COVID-19 pandemic has significantly impacted M&A activity, with many companies delaying or canceling their transactions due to the uncertainty and economic downturn caused by the pandemic.

Understanding the Different Types of M&A Transactions

There are several different types of M&A transactions that companies can use as a growth strategy, such as horizontal, vertical, and conglomerate mergers and acquisitions.

Horizontal mergers involve the combination of two companies that operate in the same industry or market. Such mergers aim to increase market share, reduce competition, and achieve economies of scale.

Vertical mergers refer to the combination of two companies that operate in different levels of the value chain of the same industry. Vertical mergers aim to increase efficiency, reduce the cost of raw materials, and improve supply-chain management.

Conglomerate mergers involve the combination of two unrelated companies that operate in different industries or markets. Such mergers aim to diversify the product portfolio, reduce business risk, and achieve economies of scale.

Another type of M&A transaction is a reverse merger, which involves a private company acquiring a public company. This allows the private company to go public without having to go through the lengthy and expensive process of an initial public offering (IPO).

Finally, there are also friendly and hostile takeovers. A friendly takeover is when the target company agrees to be acquired by the acquiring company, while a hostile takeover is when the acquiring company makes an offer to the target company's shareholders without the approval of the target company's management.

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Identifying the Key Players in M&A Case Studies

There are several key players involved in M&A transactions, including the acquiring company, the target company, the board of directors, the shareholders, and the investment bankers and advisors. The acquiring company is the buyer of the target company, while the target company is the company that is being acquired. The board of directors plays a crucial role in the approval of the transaction, while shareholders have the power to vote and approve the deal. Investment bankers and advisors are usually responsible for facilitating the transaction and advising on the best strategy for the acquiring company.

It is important to note that the role of each key player can vary depending on the specific M&A case. For example, in a hostile takeover, the target company and its board of directors may resist the acquisition, while the acquiring company may need to work with its investment bankers and advisors to come up with a more aggressive strategy. Additionally, the shareholders may have different opinions on the deal, and it is important for the acquiring company to communicate effectively with them to gain their support. Understanding the unique dynamics of each M&A case is crucial for identifying the key players and their roles.

Analyzing the Financial Aspects of a M&A Deal

Financial analysis is a critical step in evaluating M&A transactions. Companies need to conduct a thorough financial analysis to determine the value of the target company and the potential benefits of the acquisition. The financial analysis should consider the financial statements of both the acquiring and target companies, including income statements, balance sheets, and cash flow statements. Additional financial metrics such as net present value (NPV) and internal rate of return (IRR) can also be used to evaluate the financial viability of the transaction.

Another important aspect of financial analysis in M&A deals is the consideration of potential risks and uncertainties. Companies need to assess the potential risks associated with the acquisition, such as changes in market conditions, regulatory changes, and integration challenges. This analysis can help companies develop strategies to mitigate these risks and ensure a successful acquisition.

Furthermore, financial analysis can also help companies identify potential synergies between the acquiring and target companies. Synergies can arise from cost savings, revenue growth, and increased market share. By identifying these synergies, companies can better evaluate the potential benefits of the acquisition and develop a plan to realize these synergies post-merger.

Examining the Legal and Regulatory Implications of M&A Transactions

Legal and regulatory due diligence is a necessary step for any M&A transaction. Companies need to ensure that they comply with legal and regulatory requirements and that their transaction does not violate any antitrust, anti-bribery, or data protection laws. Legal and regulatory due diligence can also include assessing licenses, patents, and intellectual property rights.

Additionally, legal and regulatory due diligence can also involve reviewing the target company's contracts, leases, and other legal agreements to identify any potential liabilities or risks. This can include analyzing the terms of employment contracts, supplier agreements, and customer contracts to ensure that they are favorable and do not pose any legal or financial risks to the acquiring company. It is important for companies to conduct thorough legal and regulatory due diligence to avoid any legal or financial consequences that may arise from a poorly executed M&A transaction.

Assessing the Strategic Motivations for M&A Deals

Companies engage in M&A transactions for various strategic reasons such as increasing market share, diversifying the product portfolio, gaining access to new technologies, reducing costs, or achieving economies of scale. It is essential to assess the strategic motivations behind the transaction to determine if the deal makes sense and will add value to the acquiring company.

One of the most common strategic motivations for M&A deals is to gain access to new markets. By acquiring a company that has a strong presence in a particular market, the acquiring company can quickly establish itself in that market and gain a competitive advantage. This can be particularly beneficial for companies that are looking to expand internationally.

Another strategic motivation for M&A deals is to acquire talent. In some cases, a company may be interested in acquiring another company primarily for its employees. This can be especially true in industries where there is a shortage of skilled workers. By acquiring a company with a talented workforce, the acquiring company can quickly build its own team and gain a competitive advantage.

Evaluating the Risks and Benefits of M&A Transactions for Businesses

M&A transactions are not without risks. These risks include the integration of different corporate cultures and management styles, the potential loss of key employees, legal and regulatory compliance issues, and financial risks. On the other hand, M&A transactions can offer significant benefits such as improved market position, greater economies of scale, access to new technologies, and increased shareholder value. It is essential to evaluate the risks and benefits of M&A transactions for businesses and to mitigate risks to ensure a successful transaction.

Developing a Successful M&A Strategy: Tips and Best Practices

Developing a successful M&A strategy requires careful planning and execution. A well-designed strategy can help companies achieve their financial and strategic goals. Some best practices for developing a successful M&A strategy include conducting thorough due diligence, setting clear objectives, identifying potential risks, and developing a post-merger integration plan.

Real-World Examples of Successful M&A Deals and Lessons Learned

There are many examples of successful M&A transactions, including Disney's acquisition of Marvel Entertainment, Procter & Gamble's acquisition of Gillette, and Facebook's acquisition of WhatsApp. By studying these examples, we can learn valuable lessons about the factors that contribute to successful M&A transactions, including proper due diligence, clear strategic objectives, and effective post-merger integration plans.

Common Pitfalls to Avoid When Engaging in a M&A Transaction

M&A transactions can be complex, and there are several common pitfalls that businesses should avoid. These pitfalls include overvaluing the target company, inadequate due diligence, poor communication with stakeholders, and underestimating integration challenges. Avoiding these common pitfalls can help ensure a successful M&A transaction.

The Role of Due Diligence in M&A Case Studies: A Step-by-Step Guide

Due diligence is a critical component of any M&A transaction. Due diligence involves conducting a comprehensive review of the target company to assess its financial, legal, and operational status. A step-by-step guide to due diligence includes analyzing financial statements, reviewing contract agreements, assessing intellectual property rights, and evaluating employee relations and management processes.

How to Measure the Success of Your M&A Deal: Key Performance Indicators to Track

Measuring the success of an M&A transaction is essential to determine if the deal has added value to the acquiring company. Key performance indicators (KPIs) can help companies assess the success of the transaction. These KPIs include financial performance metrics such as revenue growth and profitability, market share, employee satisfaction, and customer satisfaction.

The Future of M&A: Trends, Innovations, and Challenges

The future of M&A transactions is rapidly evolving, driven by technological advancements, changing market conditions, and global economic shifts. Developments such as big data, artificial intelligence, blockchain, and cloud computing are transforming the way companies approach M&A transactions. As the business landscape continues to evolve, businesses will need to embrace innovation and adapt to new challenges to succeed in today's competitive market.

The M&A case study framework is complex, but by understanding the key factors that contribute to a successful transaction, companies can execute M&A deals that create long-term value. The critical success factors for M&A transactions include a well-designed M&A strategy, due diligence, proper financial analysis, and effective post-merger integration planning. By following best practices and learning from real-world examples, businesses can achieve their strategic and financial goals through M&A transactions.

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S T R E E T OF W A L L S

M&a case study: amazon and zappos.

In this Case Study module we will discuss three key aspects of understanding a real-life Mergers & Acquisitions (M&A) deal:

Company Overviews

Merger deal overview, valuation methods used.

We will take a deep look into the large M&A deal that took place in the eCommerce sector. In November 2009, Amazon, Inc. completed a previously announced acquisition of Zappos.com, Inc. Under the terms of the deal, Amazon paid Zappos.com’s shareholders approximately 10 million shares of Amazon stock (valued at $807 million at time the deal was announced) and $40 million in cash. The M&A deal was advised by investment banking teams at Morgan Stanley (Zappos) and Lazard (Amazon).

Amazon.com is a customer-centric company for three kinds of customers: consumers, sellers and enterprises. The Company serves consumers through its retail websites, and focus on selection, price, and convenience. It also provides easy-to-use functionality, fulfillment and customer service. Amazon is the largest online retailer in the nation, with revenues exceeding $45 billion annually.

Zappos.com was the #1 online seller of shoes at the time of the deal, stressing customer service. It stocks 3 million pairs of shoes, handbags, apparel and accessories, specializing in some 1,000 brands that are difficult to find in mainstream shopping malls. Through its website (and 7,000 affiliate partners), Zappos.com distributes stylish and moderately priced footwear to frustrated and shop-worn customers nationwide. In 2008, one year prior to the deal, Zappos reported annual revenues exceeding $630 million.

The following graphic illustrates the timeline of Amazon’s acquisition of Zappos, from the birth of the possible transaction until the deal’s closing:

M&A Deal Announced: In July 2009, Amazon announced that it had reached an agreement to acquire Zappos in a deal that was valued at $847 million. The Purchase Price of the deal was financed with approximately 10 million shares of Amazon common stock and $40 million of Cash and Restricted Stock units on the balance sheet.

M&A Deal Closed: In November 2009, Amazon announced that it had closed the previously announced acquisition of Zappos. Given the closing price of Amazon stock on the previous Friday (October 30, 2009), the deal was valued at approximately $1.2 billion (including fees).

Financial Advisors

Two investment banks are enrolled in the merger process. In April 2009, Zappos formally engaged Morgan Stanley as its lead financial advisor to a possible sale or strategic relationship. Throughout April, Lazard met with Amazon and ultimately became the buy-side advisor for the transaction.

Rationale for the Deal

Shortly after the deal was announced, Amazon filed an S-4 registration document with the SEC detailing the rationale of both parties for undertaking the deal. Their reasoning was as follows:

• Amazon believed that there was a tremendous opportunity to grow the Zappos brand.
• Zappos was interested in keeping its brand and culture intact, and Amazon supported its vision as an independent company.
• Zappos felt it was in the best interest of shareholders to sell based on current valuations paid by Amazon.

Comparable Company Analysis

Morgan Stanley ran a Comparable Company Analysis as part of the valuation process when estimating the value of Zappos. Comparable Company Analysis is based on the idea that companies with similar characteristics should have approximately similar valuations. Morgan Stanley compared the financial information of Zappos to that of publicly traded Comparable Companies in the eCommerce space.

eCommerce companies used in Morgan Stanley’s Comparable Company Analysis included the following:

Selected Comparable Companies

• Amazon.com, Inc.
• Blue Nile Inc.
• Digital River Inc.
• GSI Commerce Inc.
• Netflix, Inc.
• OpenTable, Inc.
• Overstock.com Inc.
• VistaPrint Ltd.

For the analysis, Morgan Stanley looked at trading multiples in the eCommerce space for two key metrics of earnings: forward EBITDA (the ratio of Enterprise Value to next year’s expected Earnings Before Interest, Taxes, Depreciation & Amortization, or EBITDA) and forward Earnings (ratio of Equity Value to next year’s expected Net Income). Based on consensus estimates for calendar years 2009 and 2010, Morgan Stanley applied these ranges to the relevant Zappos financials.

Discounted Cash Flow Analysis

Morgan Stanley also calculated Equity Value ranges for Zappos based on Discounted Cash Flow (DCF) analysis . DCF models are often used in Investment Banking deals to value a company or asset using the time value of money concept. Expected future cash flows are discounted back to today to give the Net Present Value of those cash flows, which should approximate the current value of the underlying company or asset.

Components used in a DCF Analysis

• Company’s Free Cash Flow (Morgan Stanley projected out 10 years)
• Solving for Terminal Value of the Company (Morgan Stanley uses the Perpetuity Growth Rate approach)
• Weighted Average Cost of Capital (Discount Rate for the Company’s Equity and Debt, appropriately weighted for the Company’s relative mix of Debt and Equity)

Morgan Stanley calculated a Terminal Value as of July 1, 2019 by applying a Perpetual Growth Rate range of 3-4% and a Discount Rate range of 12.5-17.5%. The projected Free Cash Flows (unlevered), Discount Rates, and implied Terminal Value were then used to solve for the Net Present Value of Zappos’ expected future cash flows. Based on the DCF projections, Morgan Stanley implied a Zappos Equity Value range of $1,555-2,785 million. The lower end of the sensitivity analysis implied a Zappos Equity Value of $430 million, so the deal value was within the sensitivity range.

Precedent Transactions Analysis

As part of the due-diligence process, Morgan Stanley also performed a Precedent Transaction Analysis to imply a value for the company using recent historical M&A transactions of similar companies. Precedent Transaction Analysis is based on the idea that recently acquired companies with similar characteristics should provide a solid guideline for a reasonable Purchase Price for the given Target company (in this case, Zappos).

Morgan Stanley researched publicly available M&A transactions looking at deal multiples in the Internet sector with a buyout of $250 million or more since January 2008. The following is a list of the transactions that Morgan Stanley analyzed:

Selected Precedent Transactions (Target/Acquirer)

• Gmarket Inc./eBay Inc.
• Bill Me Later, Inc./eBay Inc.
• Greenfied Online Inc./Microsoft Corporation
• Bebo, Inc./Time Warner Inc.
• CNET Networks, Inc./CBS Corporation
• Audible, Inc./Amazon.com, Inc.

Using the transactions chosen, Morgan Stanley selected ranges of deal multiples and applied those ranges of multiples to the appropriate Zappos financials. Morgan Stanley applied a next-twelve-month (NTM) EBITDA range of approximately 15-30x to Zappos financials, which implied an Equity Value range of $530-1,120 million. Morgan Stanley applied a last-twelve-month (LTM) EBITDA range of approximately 25-75x, implying an Equity Value range of $270-885 million.

Historical Stock Price & Next Twelve Months (NTM) Multiple Analysis

Morgan Stanley also reviewed Amazon’s stock price performance relative to an eCommerce index, an Internet Bellwether Index, and the NASDAQ over various periods of time. The following companies comprised the eCommerce index:

eCommerce Index Components

• Overstock.com, Inc.

The following companies comprised the Internet Bellwether index:

Internet Bellwether Index Components

• Google Inc.
• Yahoo! Inc.

The table below shows Morgan Stanley’s analysis of stock price performance for these selected metrics:

Morgan Stanley then looked at recent trading multiples compared to next-twelve-months (NTM) Earnings Per Share and NTM EBITDA, as well as implied stock prices using these multiples, based on current NTM financials for Amazon. Morgan Stanley commented that over the period Amazon stock traded at an NTM Price/Earnings multiple range of 21.9-94.4x and an NTM EBITDA range of 8.2-32.5x.

Footnote: Selected Zappos.com, Inc. Financial Results

M&A case interviews overview

A detailed look at m&a case interviews with a sample approach and example.

, ex-Bain Consultant, ex-Instacart Published: September 21, 2020 | Last updated: March 28, 2024 M&A motivations | Approaching M&A cases | M&A question bank | Example case walk-through #1 | Example case walk-through #2 Acquisitions are exciting and make for great headlines, but the decision to pursue one is serious business - and makes for a great case interview topic! For example, consider mega deals like Salesforce acquiring Tableau for $15.7B or Kraft and Heinz merging at a combined valued of $45B. Mergers and acquisitions (often abbreviated as M&A) are some of the splashiest business decisions, often due to the large size of the deals and ability to quickly shake up market share. Like profitability or market entry cases , M&A questions will often come up during a case interview, either as the primary topic or as a component of a broader case. Typical motivations for M&A activity (Top) Before jumping into case interviews, let's talk about why a company might pursue a merger or an acquisition in the first place. There are 3 main factors that drive M&A decisions: growth, competition, and synergies. M&A for growth purposes When determining a long-term growth strategy, companies have several options they tend to consider: build, buy, or partner. Amazon's growth into the grocery industry is a great example of a company implementing both build and buy strategies. Amazon began by leveraging their existing capabilities to build their offering internally, adding food products to their platform and same-day food delivery. However, in 2017 they announced the acquisition of Whole Foods . By purchasing an existing player in the grocery space, they were able to acquire not only the Whole Foods brand, customer base, and retail footprint, but also the employees, supplier relationships, and industry know-how. The acquisition allowed them to grow at a quicker pace than they would have been able to otherwise. M&A for competitive purposes Competition can be another big driver behind M&A activity. Consider Uber and Didi's merger in 2016. Both companies were spending enormous amounts of money to gain market share (Uber's losses were estimated at ~$2B), but were still not achieving profitability. By coming to a merger agreement, Uber and Didi were able to end the destructive competition in China and move forward as partners with a shared interest in each other's success. M&A for synergy gains Other companies pursue mergers or acquisitions due to the complementary nature of combining two businesses. These complementary aspects are called synergies and might include things like the ability to cut out redundant overhead functions or the ability to cross-sell products to shared customers. The value of potential synergies is typically estimated prior to doing a deal and would be one of the biggest points of discussion for the buyer. Note that the task of estimating the value of synergies is often more art than science, and many companies overvalue the expected synergies they'll get from a deal. This is just one of the reasons more than 70% of M&A deals fail . The synergies that can be realized through a merger or acquisition will be different for any given pair of companies and will be one of the primary determining factors in a purchase price. For example, the synergies between a mass retailer buying a smaller clothing company will be much larger than if a restaurant were to buy that same clothing company. Common cost structures and revenue streams often result in greater synergies. For example, two similar businesses that merge will be able to streamline their finance, HR, and legal functions, resulting in a more efficient operation. M&A framework (Top) Mergers and acquisitions are not entered into by companies lightly. These are incredibly strategic decisions that are enormously expensive, from both a time and resource perspective, so any leadership team will want to do their due diligence and consider these decisions from multiple angles. While each M&A scenario will have its own unique factors and considerations, there are some recurring topics you'll most likely want to dive into. We'll cover these in five steps below. 💡 Remember that every case is unique. While these steps can apply to many M&A cases, you should always propose a framework tailored to the specific case question presented! Step 1: Unpack the motivations Before recommending a merger or acquisition, the first step is to understand the deeper purpose behind this strategic decision. The motivation might be hinted at in your case prompt, or it might be apparent given general knowledge of a particular industry. For example, if the question is "Snack Co. is looking to expand into Asia and wants to determine if an acquisition of Candy Co. would be successful", you can tell that the underlying motivation for acquisition is growth through geographic expansion. If the question is about an airline looking to buy another airline, the drivers are likely the competitive nature of the industry and potential synergies in the cost structure. Once you understand what's driving the M&A desire, you'll know what lens to apply throughout the remainder of the case. You'll also be able to weave in your business acumen in your final recommendation. Step 2: Evaluate the market As with many case interviews, a well-rounded market analysis is typically a good place to start. In this scenario, the market we're evaluating is that of the target company. The goal here is to develop a broad understanding of the attractiveness of the market, as the client is essentially investing in this space through M&A activity. For this step, consider: Size and forecasted growth of the market Barriers to entry such as regulations The competitive landscape Supplier and buyer dynamics This step should not be skipped, even in the case of a merger between two companies in the same market. It can't be assumed that the market is attractive just because the buyer is in it already. Rather, if the market evaluation proves unattractive, the buyer should not only avoid the deal, but also address their existing strategy internally. Step 3: Assess the target company If the market is deemed to be attractive, the next question is if the target is the optimal company to acquire or merge with in that market. The main points to address here are: Is the target financially stable e.g. profitable with growing revenues? Does it have a large market share or growing customer base? Does it have a capable and experienced team? Does it have other intangible assets such as a powerful brand or a valuable patent? Step 4: Identify potential benefits and risks Next, consider the pros and cons of doing the deal. Where might the buyer be able to realize synergies with the target? What are the biggest risks to doing the deal? What might derail the integration? For this part, consider these key questions: Are there cost or revenue synergies between the two companies? What are the primary risks to integrating the two companies? Are there concerns around cultural fit (95% of executives say this is vital to a deal's success )? Step 5: Present your recommendation Finally, pull all of your findings together and share your final recommendation. Make sure to support your argument with data from the earlier steps and note what you would want to look at if you had more time. 💡 Shameless plug: Our consulting interview prep can help build your skills M&A question bank (Top) Below, you'll a see list of M&A case questions sourced from a top candidate - Ana Sousa , an ex-McKinsey Business Analyst currently pursuing her MBA at OSU. Case A background : Our client, NewPharma, is a major pharmaceutical company with USD 20 billion in annual revenue. Its corporate headquarters is located in Germany, with sales offices around the world. NewPharma has a long, successful record in researching, developing, and selling “small molecule” drugs. This class represents the majority of drugs today, such as aspirin. They would like to enter a new, fast-growing segment of biological drugs, which are made with large and more complex molecules, and can treat conditions not addressable by conventional drugs. The Research and Development (R&D) associated with biological molecules is completely different from small molecules. In order to acquire these capabilities, a pharma company can build them from scratch, partner with startups, or acquire them. Competition is already many years ahead of NewPharma, so they are looking to jumpstart their own program by acquiring BioAdvance, a leading biologicals startup headquartered in San Francisco. BioAdvance was founded 10 years ago by renowned scientists and now have 200 employees. It is publicly traded, and at current share price, they are worth around USD 2 billion. Example interview question #1: You are asked to evaluate this potential acquisition and advise on the strategic fit for NewPharma. What would you consider when evaluating whether NewPharma should acquire BioAdvance? Example interview question #2: let’s explore the setup with bioadvance after a potential acquisition. bioadvance’s existing drug pipeline is relatively limited, however, newpharma is more interested in leveraging bioadvance as a biological research “engine” that, when combined with newpharma’s current r&d assets, would produce a strong drug pipeline over the next 10 years. what are your hypotheses on major risks of integrating the r&d functions of both companies, example interview question #3: in the case of an acquisition, newpharma wants to consolidate all biologicals r&d into one center. there are two options to do so: combine them at newpharma’s headquarters in germany, or at bioadance’s headquarters in san francisco. currently, newpharma does not have any biological facilities or operations in germany, so new ones would need to be built. how would you think about this decision. Case B background : Total Energy Inc. (TEI) is a private, medium-sized company with a strong history of drilling and producing natural gas wells in Pennsylvania. They own an ample, and believe valuable, set of land assets where more wells could be drilled. The company is well capitalized but has seen profits decline for the last few years, with a projection of loss for the next year. One of the main drivers is the price of natural gas, which has dropped considerably, mainly because companies like TEI have perfected unconventional drilling techniques, leading to an oversupply of the North American market. Current prices are at a five year low. A larger competition has approached TEI’s leadership about acquiring them for an offer of USD 250 million. Example interview question #1: TEI’s leadership would like your help in evaluating this offer, as well as identifying alternative strategies. How would you assess this matter? Example interview question #2: the exploration team at tei has found that there is an oil field in texas that they could acquire, and immediately start drilling. drilling is one of the core competencies and strengths of tei. how would you think about this option in comparison to the selling offer. Case C background : Tech Cloud has developed a new research engine designed to increase online retail sales by reshaping customer search results based on real-time customer data analysis. An initial assessment indicates outstanding results in increasing sales, and therefore a tremendous potential for this product. However, Tech Cloud is a small startup, so they do not currently possess the capabilities to sell and install their algorithm in large scale. A major tech company has approached Tech Cloud with a partnership offer: to help them make the new product scalable, offering to pay $150M for it as is, and asking for 50% of profits on all future sales of the new research engine. Example interview question #1: How would you assess whether Tech Cloud should or should not take this partnership offer? Example interview question #2: what risks would you outline in this partnership, and how would you recommend tech cloud to mitigate them. Case D background : Snack Hack is the fifth largest fast-food chain in the world in number of stores in operation. As most competitors, Snack Hack sells fast-food combo meals for any time of the day. Although Snack Hack owns some of its store, it is mainly operating under a franchising business model, with 85% of its operating stores owned by franchisees. As part of a growth strategy, Snack Hack has been analyzing Creamy Dream as a potential acquisition target. Creamy Dream is a growing ice cream franchise with a global presence. While they also operate by franchising, there is a difference: Snack Hack franchises restaurants (stores), while Creamy Dream franchises areas or regions in which the franchisee is required to open a certain number of stores. Example interview question #1: What would you explore in order to determine whether Snack Hack should acquire Creamy Dream? Example interview question #2: what potential synergies can exist between snack hack and creamy dream, example interview question #3: one of the potential synergies that our team believes has great potential is increasing overall profitability by selling creamy dream ice cream at snack hack stores. how would you evaluate the impact of this synergy in profitability, example m&a case #1 (top). We'll now use our framework to tackle one of the example questions we listed above. Let's focus on Case A and answer the following question: You are asked to evaluate this potential acquisition and advise on the strategic fit for NewPharma. What would you consider when evaluating whether NewPharma should acquire BioAdvance? Unpacking: why do they want to acquire. Following our recommended framework, the first step is to identify the underlying purposes of the acquisition. In this case, you can tell from the context information that their strategic motivation is to enter a new type of drug market. The case has already stated your alternatives outside of this M&A: to build capabilities from scratch or make a partnership/acquisition of a different target. Evaluating the market: is it an attractive space? Step 2 in our framework is to evaluate the market. You are told the biological segment is fast-growing, and does not overlap with NewPharma current products, therefore there is no risk of cannibalization. You still need to know who currently competes in this segment, what is the general profitability of these drugs and how it compares to small molecule drugs, and deep dive on the regulation for these drugs, since pharma industry is strongly regulation-driven. Assessing the target: is it a good company? Next, we jump into step 3, which is assessing the target. This is where we were given the smallest amount of information, so there is much to cover. R&D is a time-consuming process, and NewPharma will not see profits for drugs they start developing together in case of an acquisition in many years, maybe decades. Therefore, the first thing to look at is the value of BioAdvance’s current drug pipeline, or, in other words, what drugs are they currently developing, their likelihood of success, and their expected revenues and profits. Another key factor is their capabilities, which is what NewPharma is mostly interested in. What does BioAdvance bring to the table in terms of scientific talent, intellectual property, and research facilities? We also want to look at whether they have current contracts or partnerships with other competitors. Furthermore, besides their main capability which is research, NewPharma should also learn about their marketing and sales capabilities, to identify any synergies in global sales, and also to understand how they currently promote biologicals, since NewPharma has no experience in this. A great structure would also consider any gaps BioAdvance might have, both in R&D and marketing capabilities. Lastly, NewPharma needs to conduct a due diligence to assess the value of BioAdvance, and therefore the acquisition price. Identify risks and benefits Step 4 is identifying the risks and benefits. In a high level, the risks include potential of them having a weak pipeline, which would mean not seeing any profits for years. In addition, NewPharma is a European country, while BioAdvance is from California, which means there is a risk of cultural barriers between both their leaderships and their R&D scientists. In addition, there is the risk that entering this new drug market is not aligned with NewPharma’s strategy or core competencies. The benefits include quickly adding R&D capabilities to catch up with their competitors and addressing a new segment of customers that they currently do not serve. Example M&A case #2 (Top) Let's walk through another example M&A case to illustrate how the framework we've introduced might be applied in practice. We'll lay out the thought process a candidate would be expected to demonstrate in a case interview. Here's our prompt: "Our client, Edu Co., is a publishing company that has historically focused on K-12 curriculum and printed educational materials. They're looking at acquiring a startup that's developed digital classroom materials and assessments. How should they evaluate this opportunity?" Our first step is to consider why Edu Co. is pursuing an acquisition. From the prompt, we can see that they're an established business looking to acquire a newer entry to the market. Edu Co. has focused on their core capabilities - content and printing - but has not invested in a digital product. Edu Co. is clearly eyeing the startup target as a way to accelerate their growth into the edtech space. Rather than investing in building a digital product themselves, Edu Co. is looking to buy a company that already has a strong product, customer base, and team. To begin, we would want to evaluate the digital education market. We might ask for more information on the size and growth rate to start. If we find out the market is large and forecasted to grow at 10% per year, that tells us it's a fairly attractive market. In terms of barriers to entry, there is limited regulation around K-12 content and assessment. In the edtech space, the main concern is around the secure storage of information having to do with minors. The competitive landscape is something we would want to ask for more information about. We would want to know how many other companies were pursuing these products and which had the most market share. If the market is highly fragmented, it means there is still room for a clear winner to emerge. Regarding customer dynamics, we would want to know about any indications of changing preferences. For example, the push towards remote learning during COVID-19 would be relevant, as teachers and students have quickly become more comfortable with digital products. Once we've determined that the market for digital education is attractive, we'll want to turn our attention to the target company. We would start by asking the interviewer for any information on the company's finances, team, market share, and other assets. Assume the interviewer gives us revenue, profit, and market share data for the past 3 years. As part of our due diligence, we would want to ensure that all three of these metrics were either stable or growing. If we saw dips in this data, it would be important to dive deeper and understand why their performance had declined. We would also want to know what their organizational structure looked like. If their staff was primarily sales & marketing (meaning they had outsourced their engineering work), they would be a less attractive target, as acquiring the tech personnel was one of the big reasons Edu Co. was looking to buy the business. Finally, we would want to understand the technology they had developed. It would be important to understand the strengths and weaknesses of their product as well as any patents or IP. Next, we would want to lay out any risks or benefits to acquiring the company. The biggest risk we see is that the two company cultures are very different - Edu Co. is large, slower to make changes, and has an older workforce, whereas the other is much smaller, more agile, and younger. If we tried to integrate these two companies, there may be friction between the two working styles. On the benefits side, there is potential for both cost and revenue synergies. On the cost side, we would be able to cut redundant administrative roles out, such as HR and finance. On the revenue side, Edu Co. may be able to leverage their customer relationships to cross sell digital products. Present your final recommendation Eventually, the interviewer would ask if Edu Co. should pursue the acquisition. Here, we would want to pull all the findings together and lay out our reasoning. Start with the answer first: Recommendation: "Edu Co. should acquire the edtech startup. It's an attractive market that's growing rapidly and doesn't have a clear leader yet. Furthermore the startup appears to be well-positioned in the market: their revenues, profits, and market share have been growing. As Edu Co. looks to grow into the digital education space, this acquisition will give them a leg-up on competitors. Edu Co. will also be able to leverage their customer relationships to rapidly expand the use of this new digital product. However, Edu Co. will want to develop a robust integration plan to mitigate the risk of culture clash. They may want to consider letting the startup remain in their existing HQ to retain their agile working style." Summary: putting it all together (Top) As discussed, M&A cases are fairly common because they have the potential to cover a lot of ground, relevant business challenges. Realize that in a real M&A case, the due diligence on the target alone could take weeks. It's likely your interviewer will have you dive deeper into one specific step to observe your thought process. In that case, stick with your structure, follow their lead, and always lay out the next steps you would follow if you had more time. Finally, keep in mind that M&A doesn't just come up because it's fun to analyze; it's also an important source of revenue for the firms - Bain's private equity group does hundreds of due diligence cases annually and BCG's post-merger intergration (PMI) practice makes good money helping firms execute a merger successfully. Read this next: Full cases from RocketBlocks 29 full cases from consulting firms Profitability case interviews Market entry case interviews Weird and unusual case interviews Pricing case interviews Market sizing case interviews PE due diligence interviews Supply chain case interviews Digital transformation consulting cases See all RocketBlocks posts . Get interview insights in your inbox: New mock interviews, mini-lessons, and career tactics. 1x per week. Written by the Experts of RocketBlocks. P.S. Are you preparing for consulting interviews? Real interview drills. Sample answers from ex-McKinsey, BCG and Bain consultants. Plus technique overviews and premium 1-on-1 Expert coaching. Launch your career. For schools Expert program Testimonials Free resources Behavioral guide Consulting guide Product management guide Product marketing guide Strategy & BizOps guide Consulting case book Interview prep Product management Product marketing Strategy & Biz Ops Resume advice Part I: Master resume Part II: Customization Focus: PM resumes Focus: Consulting resumes Focus: BizOps resumes SUGGESTED TOPICS The Magazine Newsletters Managing Yourself Managing Teams Work-life Balance The Big Idea Data & Visuals Reading Lists Case Selections HBR Learning Topic Feeds Account Settings Email Preferences The Case for M&A in a Downturn Brian Salsberg Companies that made significant acquisitions during the financial crisis outperformed those who didn’t. As companies begin planning for a post-Covid future, there may be opportunities to make one or more long-sought acquisitions. Deal premiums are likely to come down and assets that companies had been reluctant to sell may become available. But the window for maximizing value could be relatively short, if history is any indication. An analysis of evidence from the global financial crisis shows that companies that made significant acquisitions outperformed those that did not. Companies considering an M&A will need to consider some of the unique aspects to getting a deal done, from transaction diligence to post-acquisition integration. In these difficult times, we’ve made a number of our coronavirus articles free for all readers. To get all of HBR’s content delivered to your inbox, sign up for the Daily Alert newsletter. Most companies are still in the early days of assessing the impact from the Covid-19 crisis on their business. But as they begin planning for the future, there may be opportunities to make one or more long-sought acquisitions. Brian Salsberg is the EY Global Buy and Integrate Leader. In this role, he leads fully-integrated M&A management services across sectors for the EY organization. He has experience working directly with CEOs, executives, business teams and boards of directors, as well as PE-backed companies, in all facets of strategic planning, due diligence, corporate development and M&A. Partner Center Popular Searches Your previous searches, recently visited pages. Content added to Red Folder Removed from Red Folder State of the Market & Hot Topics Industry Views Aerospace and Defense M&A Automotive and Mobility M&A Banking M&A Building Products M&A Consumer Products M&A Energy and Natural Resources M&A Healthcare and Life Sciences M&A Insurance M&A Media M&A Payments M&A Retail M&A Technology M&A Telecommunications M&A Wealth and Asset Management M&A Regional perspectives. 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A clear strategy, sourcing the right deal, sound diligence and smooth integration are crucial. Whether pursuing scale, new technology or entry into new markets, we can help you achieve your strategic objectives through mergers and acquisitions (M&A), divestitures and joint ventures. EY M&A consulting helps you: Perform portfolio reviews to understand your best path to growth and competitive advantage  Assess the strategic fit of a business by evaluating the market opportunity and potential synergies Conduct diligence, including financial, tax, commercial, operational, regulatory, IT and cyber Determine the right valuation and approach to capital markets for funding Operationalize the deal Our latest M&A thinking M&a case studies. EY-Parthenon teams supported Daimler AG through strategic divestments and back-office transformation. Learn more. 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Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. M&A Cases Merger and acquisition ( M&A ) cases are fairly common in consulting case interviews , especially for candidates targeting consulting firms with a focus on strategy, corporate finance, or mergers and acquisitions. While they may not make up the majority of cases, they are frequently included to assess your ability to think strategically, analyze financial data, and understand the implications of complex business decisions. M&A cases are particularly relevant for consulting roles that involve advising clients on growth strategies, restructuring , or corporate development. Overall, while not every case interview will feature an M&A scenario,we recommend you to be prepared to tackle them effectively as part of your case interview preparation. What Are M&A Cases? In an M&A case you are typically tasked with assessing the feasibility and implications of potential mergers, acquisitions, or divestitures for a client or company. This often involves analyzing market dynamics, financial statements, competitive landscapes, and strategic synergies to provide recommendations on whether to proceed with a deal and how to optimize its value. Success in M&A cases requires a holistic understanding of business strategy, financial analysis, and industry trends , coupled with strong communication and problem-solving skills. Moreover, many growth strategy case studies eventually lead to M&A questions. For instance, companies with excess funds, searching for ways to grow quickly might be interested in acquiring upstream or downstream suppliers (vertical integration), direct competitors (horizontal integration), complementary businesses, or even unrelated businesses to diversify their portfolio. The most important requirement for an M&A is that it must increase the shareholders' value , and it must have a cultural fit even when the decision financially makes sense. An example prompt for a typical M&A case would be the following: "Your client is a mid-sized retail chain considering acquiring a smaller competitor in the same market. They believe this acquisition could expand their market reach and increase profitability . Your task is to evaluate the strategic rationale behind the acquisition, assess the financial implications, and provide recommendations on whether the client should proceed with the deal. What factors would you consider in making your recommendation?" How Can You Approach an M&A Case – Key Areas to Analyze First of all, there is no standard approach or pre-thought out framework you can use for all M&A cases (or cases in general). It is absolutely crucial that you understand the unique situation of your client and develop a customized solution for the task you were assigned. To help you with your preparation, we have summarized key areas to analyze in an M&A case. However, it is very unlikely that you will be asked to cover all of them. It is simply too much for a 30-40 minute case interview, so usually the interviewer will put the focus on one or two aspects of the analysis and guide you to dive deeper. It is also possible that your M&A case does not resolve the question if a deal should be aimed for or not, but rather focuses on issues in the post merger integration process. Therefore, it is absolutely crucial that you listen carefully during the case prompt, reassure yourself that you understand the problem and objective of the client correctly and adjust your approach accordingly. Related Cases Bain Case: Old Winery tkMC Case: Portfolio optimization of a holding company General holding, chip equity, paper print. Select category General Feedback Case Interview Preparation Technical Problems Realizing M&A value creation in US banking and fintech: Nine steps for success Co-leads McKinsey’s Global Banking & Securities Practice and our work in North America. Ishaan works with clients across financial services and private equity. His client service spans strategy, corporate finance, digital and analytics, performance transformation, and M&A. Advises financial institutions on capital markets, valuation, investor communications, and strategy topics Serves leading financial institutions on strategy and M&A throughout the deal cycle – from due diligence through integration. He co-leads McKinsey's banking M&A joint venture globally. Max also works intensively with fintechs and leads the Fintech Practice in Germany Leads McKinsey’s Global M&A and Banking/Fintech service line, with extensive experience in counseling senior executives on and leading due diligence and integrations in FIG, Fintech and TMT sectors November 15, 2019 For almost a decade after the financial crisis, M&A activity in the US banking industry remained limited, as many banks wrestled with challenging integrations and “shot-gun” combinations. But deal-making bounced back in 2018 and looks likely to expand. While several factors favor that growth, would-be deal-makers face obstacles. Our analysis suggests that most US bank mergers from that decade failed to create value. Going forward, US banks will require a smart strategy and the right integration approach to fully realize the value creation potential in M&A. US banking M&A is on the upswing US banking M&A was relatively flat from 2009 to 2017; the industry averaged about 20 deals a year. But in 2018 activity more than doubled, as US banks completed 49 transactions. And, with total deal value of $38 billion through the first half of 2019, this year already substantially outpaces 2018. While many recent deals, such as the merger of BB&T and SunTrust and that of TCF and Chemical Financial, have focused on increasing geographic footprints and scale efficiencies, 1,2 fintech and capability-building deals are gaining traction. US banks averaged just three or four fintech deals per year through 2017, but deal volume exploded in 2018 with 16 transactions, and the first half of 2019 saw nine fintech deals (Exhibit 1). A good example of recent deals is Goldman Sachs’ acquisition of United Capital and its FinLife CX digital customer-service platform to add an advisor-led tech-enabled platform to the bank’s growing suite of digital offerings. 3 Tailwinds favor M&A growth  In 2019, market reaction to bank-to-bank and fintech mergers has generally been positive. On the day of deal announcement, the market rewarded both BB&T and SunTrust with share value increases of 4 percent and 10 percent, respectively. More fundamentally, we believe there are multiple reasons why M&A activity in US banking could continue to increase. The profitability of US banks has improved substantially, thanks to significant productivity investments, higher interest rates, and lower taxes. The average ROE of US banks climbed from 8.6 percent in 2013 to 10.8 percent in 2018. Banks also enjoy a stronger capital position that puts them in a better position to execute M&A. Regulatory reform is reducing requirements for banking combinations. The threshold triggering substantial additional process and capital measures has increased from $50 billion to $250 billion (Exhibit 5). This particularly benefits regional banks that need greater size and scale to strengthen their competitive position for deposits versus larger banks—where they have been challenged. US regional banks face intense pressure to build new capabilities in robotics, machine learning/artificial intelligence, and advanced analytics (e.g., people and talent analytics) as banking increasingly digitizes. M&A is one of the best ways to acquire skills or generate cost efficiencies that can fund internal efforts. For example, when BB&T acquired SunTrust, it announced a cost-savings target of $1.6 billion and plans to invest a substantial portion into digital banking. 5 JPMorgan Chase earmarked $11.5 billion in 2019 alone for technology investments, with machine learning, artificial intelligence and blockchain identified as top priorities; a good example is the bank’s recent acquisition of InstaMed, to support its position in payments. CapitalOne purchased Wikibuy, an online website that allows shoppers to compare prices for items, to help customers “feel confident in their purchasing decisions.” 6 The US is home to a lot of banks. While consolidation has steadily reduced the number of US banks from roughly 15,000 in 1985 to about 5,000 today, many industry executives and experts expect the consolidation trend to continue. Our research shows that more than 60 US banks with assets of $10 billion to $25 billion might be attractive acquisition targets for well-positioned regional banks—for example, regional banks with a high cost-income ratio and a low loans-to-deposits ratio, among other factors. Beyond these trends favoring M&A growth, we believe that M&A will prove critical to next-generation transformation in US banking. Leading digital European markets clearly demonstrate the power of digitized banking, as banks there are achieving cost-to-asset ratios as much as 60 to 80 percent lower than US banks. A smart, well-executed M&A strategy can equip US banks to make slow internal efforts history. Banks can dramatically improve their cost productivity, with machine learning and robotics, and their people development, with advanced people analytics that better match talent to value and develop future leaders. Successful bank acquirers get nine things right In our experience, successful bank acquirers of other banks and fintechs take a strategic, long-term approach to M&A. They invest time and resources to build an end-to-end M&A approach, including deep understanding of how M&A serves their overall strategy, optimal candidate development and cultivation approaches, the merger management expertise required to execute, and the long-term capability development that enables them to deliver consistently. In our work, we see the most effective acquirers apply nine principles to realize full value from their M&A strategy. 1. Make M&A a core plank of the overall strategy—don’t rely on opportunistic M&A. Too many acquirers resort to M&A as a way to buy growth or acquire an asset opportunistically, reacting to available deal flow to drive activity, without thorough understanding of how the deal will create value. The best acquirers embed M&A in their strategic planning process. They require businesses to identify where inorganic moves are necessary to advance the bank’s strategy and then translate these moves into actionable deal theses that guide candidate scanning, prioritization, and progress review. Only after pressure-testing and prioritizing these themes do leaders develop lists of M&A targets that fit the investment themes within the overall strategy. For banks, this means making M&A an integral part of the capital-planning process, with the annual capital plan adjusted—materially—to support the highest-potential investment themes. Practically speaking, this effort requires getting very clear on the decision rights and governance model for M&A execution; for example, who leads pre-diligence exploration of companies on the M&A candidate lists, what role the CFO plays, and what triggers full diligence. 2. Continuously cultivate top-priority deal candidates with a programmatic approach, not one-off efforts. The best bank acquirers source and develop potential M&A candidates continuously and develop them across all stages of the M&A process. These efforts extend from conducting rapid pre-diligence review of prioritized targets, including high-level valuation and assessment of synergy potential, to proactive outreach to targets, supported by talking points on the bank’s partnership vision. 3. Assess the full spectrum of opportunities, including partnerships, joint ventures, and alliances, to gain scale and capabilities. Highly innovative industries like pharmaceuticals and high-tech have long relied on joint ventures and alliances to develop their businesses. As banking advances further into digitization and advanced analytics, JVs and alliances are becoming much more relevant, especially for regional banks that lack the digital and fintech M&A resources of the larger money center banks. In particular, to succeed in digitization, many regional banks will have to assess the full range of partnership opportunities, from full joint ventures (with or without equity) to strategic partnerships to contractual alliances. 4. Tap divestitures to strengthen value creation—don’t buy without understanding the potential for a simultaneous sale. Our analysis of thousands of deals finds that companies active in divesting, not just acquiring, achieve TRS that is 1.5 to 4.7 percent higher than the TRS of companies focused on acquisitions alone. Successful bank acquirers use forcing mechanisms like the budget process to review the landscape of potential assets to sell and proactively shape the assets for sale based on an understanding of their value to a more natural owner. These winners also pay special attention to managing the stranded costs that can represent huge value leaks for banks. One leading money center bank makes divestiture review part of its annual strategic planning process, evaluating businesses throughout the year on their strategic importance, operational value, and amount of capital freed up, if sold. The bank has a “productivity czar” who reports to the CEO and uses an algorithm-supported approach to counter the tendency of division leaders to protect assets in their portfolio by overstating their importance. The algorithm deepens insight into growth contribution (or lack of), required management resources, operational complexity, capital deployed, and ROE impact. This approach makes the bank much more nimble in divestitures and ready to use “acquisitions for growth” as catalysts for simultaneous value-adding divestitures. 5. Establish a value-added integration management office (IMO) led by an “integration CEO”—don’t make integration a checklist exercise. We often hear financial industry executives say that they have a merger playbook and know how to execute. But the TRS numbers show that banks have struggled to create value through M&A. Beating the odds requires more than checklists used in past integrations or third-party process support. M&A winners establish an IMO and empower an integration CEO to tailor how they manage every integration effort to deal rationale and sources of value. For example, winners heavily discount cost synergies envisioned beyond 24 to 30 months because they know the importance of realizing the lion’s share of the synergies in year one. Winners also move purposefully to take control of the acquired bank, particularly its credit decisions, portfolio management, and back-office systems and costs. One leading bank mobilized a “SWAT” team to stabilize the target’s shaky balance sheet and free up substantial capital. Winners also implement cost-saving measures as soon as possible. Failure to do so poisoned the culture in one bank’s branch sales network through delaying inevitable branch headcount reductions until several months into the integration effort. 6. “Open the aperture” on capturing value—don’t rest with the due diligence numbers. Failing to update synergy expectations during integration is one of the most common, but avoidable, pitfalls in any transaction. This is especially true in banking, where the industry structure invites treating M&A as a project. This project typically sets synergy targets during due diligence, builds the targets into department operating budgets, and creates a checklist-based PMO process to monitor progress against the targets. M&A winners regularly exceed due diligence synergy estimates by 200 to 300 percent because they reassess synergy potential throughout the life cycle of the deal, especially pre-close, pushing hard to uncover upside and transformational synergies. In successful banking deals, this often means dividing synergy-capture efforts into two time-based categories ─ initiatives that move quickly to generate maximum bottom-line impact in the first year (and often capture 50 to 70 percent of the cost synergies) and larger, longer-term initiatives that are typically technology-dependent. Protecting the base business is a critical component of value capture that often goes unappreciated in banking mergers. M&A leaders make taking frequent temperature checks and attending to the health of the front-line business and customer satisfaction during integration a core responsibility of the integration CEO. For example, customer churn in corporate banking requires special attention early in the merger, since many customers do business with multiple banks. In a recent successful merger, this meant proactive outreach to corporate customers by pairs of acquirer/target relationship managers and careful manual migration of customers to the acquiring bank to avoid any errors or complaints. Ensuring that the value capture team opens the aperture on synergies is particularly important given the recent tendency to announce a banking deal as a “merger of equals.” The intent is admirable but impractical to enact. Merger-of-equals positioning may benefit pricing, but it typically slows and softens decision-making, hamstrings implementation, and raises the risk of value leakages throughout the integration effort.  7. Build an independent technology roadmap—don’t let current business operators and maintenance dictate the approach to capturing value. In our experience, IT enables about 70 percent of a bank’s cost synergies but, without careful planning, can easily take 50 percent longer than expected to capture the value and can add incremental costs of 50 to 100 percent to what the bank already spends on IT. Making tough choices on IT integration is especially challenging for banks because they rely heavily on third parties to maintain their many custom-built legacy platforms. Banks can’t always count on those providers to provide objective advice on the right technology roadmap to follow. Successful bank acquirers make IT integration a strategic priority, rather than a PMO-managed integration project. They develop an overall technology blueprint aligned with their strategy, sources of deal value, and customer-service requirements before launching costly IT integration initiatives and project management. One M&A leader looks to independent, internal subject-matter experts to build the “no case” for proposed technology roadmaps, tasking them with pressure-testing the logic and forcing discussion of other options. This approach is particularly salient in fintech deals, since, along with talent, the technology platform is often the raison d’être of the deal, but in some cases that platform may meaningfully exceed the experience and expertise of the bank’s IT team. The bank must determine as early as possible what capabilities of the target the deal should preserve and what target-specific attributes (people, processes, and platforms) make those capabilities work so the integration effort can protect and nurture those attributes to scale. One M&A leader has repeatedly chosen its future platform within the first months after deal announcement, using workarounds after close to maintain an adequate customer experience until the optimal systems integration roadmap is ready. This bank often migrates first and transforms later because it knows that advancing on both fronts at once is too complex. In a recent successful bank-fintech merger, customer migration proceeded in two waves—manual migration of corporate customers, followed by automated migration of retail customers. Goldman Sachs’ acquisition of Final is a good example of a deal that augments strategy, in particular Goldman Sachs’ publicly stated objective to invest in its consumer-centric business. Final impacts Goldman Sachs’ partnership with Apple Card by adding digital features for fraud and theft protection, including those which allow consumers to monitor their spending in real time. 8. Take a scientific approach to identifying cultural issues and change management—don’t pay lip service to cultural integration. Mission, vision, and values can look very similar across banks. Executives often return from pre-deal announcements convinced that the cultures of the companies involved are very similar and that smooth organizational integration will be a snap. This is a major source of deal failure. M&A leaders don’t underestimate the importance of proactively tackling the challenges involved in integrating cultures. They understand that culture goes beyond values and comes alive in a company’s management practices—the way that work gets done, such as whether decisions are made by consensus or by the most senior accountable executive. If not addressed properly, cultural integration challenges inevitably lead to friction among leaders, decreased productivity, increased talent attrition, and lost value. M&A leaders rigorously assess top management practices and working norms early and design the overall program to align practices and mitigate risks early and often. Alphabet, for example, is well-known for a programmatic approach to M&A and integration of fintech acquisitions that proceeds in phases linked to talent and sources of deal value. Successful cultural integration often lends itself to an added area of opportunity in scale mergers. In these cases, the merger itself can be leveraged to reinforce critical behaviors that may be lacking in the acquiring organization, thereby creating not just an integrated culture but putting a stop to bad behaviors that might have existed pre-integration. In these situations, leading organizations choose to evaluate culture, and more broadly talent management and experience, holistically across both organizations and set a clear aspiration for a merged culture that will best enable the new organization’s strategic goals. This is particularly important when the acquisition brings in fundamentally new talent pools that may have different definitions of success, progression, and experience, as in the acquisition of a fintech into a large traditional bank. M&A leaders also don’t skimp on formal change management planning. They take a rigorous and regimented approach to each phase of the integration, engaging stakeholders through the process and ensuring a dedicated handoff period for the transition to steady state. 9. Build capabilities for future deals—take full advantage of every opportunity to deepen the bench. M&A leaders treat each deal as an opportunity to upgrade their M&A team’s skills and expertise. In banking M&A, talent is increasingly emerging as one of the primary sources of competitive advantage. Banks that allocate human capital, as well as financial resources, strategically and dynamically stand to generate significant economic return. This makes leadership and talent development the “next big thing” for unlocking value in banking M&A, with direct impact on the bottom line. After doing a deal, M&A leaders are just as rigorous in measuring success. They carefully track deal impact across critical KPIs, such as lower cost-income ratios, increased revenue growth above base trajectory, and more efficient use of capital. Many CEOs and top teams in US banking and fintech see increasing their existing talent bench as critical for success, as has been raised with McKinsey in multiple CEO discussions and recent banking executive roundtables. Most need to make building M&A and integration skills a top priority. This calls for defining their talent development needs comprehensively and responding appropriately—for example, with executive training programs, leadership development, functional capability-building, coaching, and proprietary diagnostics for the talent development “playbook.” One winning financial industry acquirer regularly devotes a full day, usually a weekend, to reviewing the profiles needed for the integration of a specific deal. This M&A leader spends substantial time identifying the right talent for each role and making sure that the hand-picked leaders get the right training to succeed in the context of the given deal. Deal-making by US banks spiked in 2018 and shows an upward trajectory for 2019. Many banks can capitalize on the opportunities, especially if they apply the principles of M&A strategy and integration that have served the few successful acquirers in the industry so well. The authors would like to acknowledge the contributions of Alok Bothra, Alex Camp, Kameron Kordestani, Steve Miller, and Zoltan Pinter to this article. 1 “BB&T and SunTrust to Combine in Merger of Equals to Create the Premier Financial Institution,” SunTrust press release, February 7, 2019. 2 “Chemical Financial Corporation and TCF Financial Corporation Close Merger of Equals to Become the New TCF,” Business Wire, August 1, 2019. 3 “Why United Capital Chose Goldman, Not a PE Backer,” Barrons, May 16, 2019. 4 Based on comparison with an index of peers’ TRS during the two years following an acquisition. 5 “BB&T and SunTrust to Combine in Merger of Equals to Create the Premier Financial Institution,” SunTrust press release, February 7, 2019. 6 “Changing the Game: Saving Money Online Is Easy, Lightning Fast With Wikibuy from Capital One,” CapitalOne.com. 7 “U.S. Bank expands fintech partnerships to B2B space,” usbank.com, October 29, 2018. How to master M&A consulting case studies? M&A deals can involve huge sums of money. For instance, the beer company AB InBev spent $130bn on SAB Miller, one of its largest competitors, in 2015. As a comparison, South Africa's GDP was ~$300bn the same year. These situations can be extremely stressful for companies' executives both on the buying and selling sides. Most CEOs only do a handful of acquisitions in their career and are therefore not that familiar with the process. If things go wrong, they could literally lose their job. As a consequence, management consultants are often brought into these situations to help. Most top firms including McKinsey, BCG and Bain have Partners specialised in helping CEOs and CFOs navigate M&A. There is therefore a good chance that you will come across an M&A case study at some point in your consulting interviews . Preparing for this situation is important. Let's first step through why companies buy each other in the first place. Second, let's discuss how you should structure your framework in an M&A case interview. And finally, let's practice on an M&A case example. Click here to practise 1-on-1 with MBB ex-interviewers Why do companies buy each other. Imagine you are the CEO of a large beer company called AB InBev. What are the reasons you would decide to buy your competitor SAB Miller? Let's step through the three most common ones. Reason #1: Undervaluation The first reason you might decide to buy SAB Miller is that you think it is undervalued by the stock market. For instance, SAB Miller owns leading beer brands in Africa and China. And your analysis might suggest that beer consumption in these markets is going to grow even faster than everyone else expects. The stock market might value SAB Miller at $130bn, but you think it is actually worth $150bn because of the insights you on have on Africa and China. If that's only reason you are buying, you would behave as a pure financial investor. Reason #2: Control The second reason you might buy SAB Miller is that you think it is poorly managed and you can do a better job than the current management if you get control. For instance, you might think that SAB Miller's marketing team really isn't doing a good job. The current revenues of the company are $50bn, but you estimate that you can grow these revenues to $55bn by adjusting the marketing messages and without spending additional money. In that case, you'll pay $130bn for SAB Miller today, but once you've adjusted the marketing strategy and increased revenues, it will be worth much more. Reason #3: Synergies The final reason you might buy SAB Miller for $130bn is that you think you can create value by combining it with your own company. Let's assume AB InBev was worth $200bn at the time of the purchase. As the CEO you could have reasons to believe that the combination of both companies would be worth MORE than the individual parts; i.e. more than $330bn ($200bn + $130bn). For instance, if you combine both entities, you might decide to keep the AB InBev marketing team and to let go the SAB Miller one. The combined entity would maintain the same revenues but have lower costs and therefore higher profits. This is what's called synergies. Having a high-level understanding of the three concepts above is more than enough for the purpose of case interview preparation . But if you are interested in the topic and would like to read more about it, we would recommend the following McKinsey article about successful acquisition strategies . M&A case framework Right, now that you have a high-level understanding of why companies buy each other in the first place, let's discuss the framework you should use to analyse the transaction. Partners at McKinsey, BCG and Bain typically look at 4 areas when working on M&A cases. Let's step through them one by one and list the questions you'd want to answer in each. 1. The market The first area consultants typically analyse in M&A cases is the market. This is extremely important because a big part of the success or failure of the acquisition will depend on broader market dynamics. Here are some of the questions you could look into: Are both companies (buyer / target) in the same markets (e.g. geographies, customers, etc.)? How big is the market? And how fast is it growing? How profitable is the market? And is its profitability stable? How intense is the competition? Are there more and more players? How heavily regulated is the market? Are there barriers to entry? Note you can get inspiration from Porter's 5 forces for this section of your framework. If you would like more details about it, you can read our . 2. The target The second important area to analyse is the company you are thinking of acquiring (i.e. the target). Your overall objective here will be to understand how attractive it is both financially and strategically. What is the current and future financial position of the target (e.g.: revenues, profits, etc.)? Is it under / overvalued? Does the target own any assets (e.g.: technology, brands, etc.) or capabilities (e.g.: manufacturing know-how) that are strategically important to the buyer? What's the quality of the current management? Do we believe we can add value by getting control and running the company better? Is the target company's culture very different? If so, are we confident it could still integrate well with the buyer? 3. The buyer The third area consultants typically analyse is the buyer (i.e. the company buying the target). It is important to have a good understanding of what's motivating the purchase the target and whether the buyer has adequate financial resources. What's the acquisition rationale? Undervaluation, control, synergies or a combination? Can the buyer easily finance the acquisition? Or will it need to lend money? Does the buyer have any experience in integrating companies? Was it successful in the past? Is this the right time for the buyer to acquire another player? Does it risk losing focus? 4. Synergies and risks And finally, the last area to analyse is the synergies and risks related to the acquisition. This is usually the hardest part of the analysis as it is the most uncertain. What is the value of the individual and combined entities? Are there cost synergies (e.g.: duplication of roles, stronger buying power, etc.)? Are there revenue synergies (e.g.: product cross-selling, using the target's distribution channels for the buyer's products, etc.)? What are the biggest risks that could make the acquisition fail (e.g. culture fit, regulation, etc.)? It is almost impossible to cover all these aspects in a 40mins case interview. Once you will have laid out your framework, your interviewer will then typically make you focus on a specific area of the framework for the rest of the case. This is usually the market, or the target company. But can also sometimes be the other two points. M&A case examples Ok, now that you know how to analyse M&A situations, let's step through a few real life examples of acquisitions and their rationale. For each example, you should take a few minutes to apply the framework you've just learned. Once you have done that, you can then read the actual acquisition rationale. Situation #1: At the beginning of the 2010s, IBM went on an acquisition spree and purchased 43 companies over 3 years for an average of $350 million each. All of these companies had smaller scale than IBM and slightly different technology. Rationale: The main reason IBM decided to buy these 40+ companies is that they could all benefit from the firm's global sales force. Indeed IBM has a presence in the largest software markets in the world (e.g. North America, Europe, etc.) that smaller companies just don't have. IBM estimates that thanks to its footprint it could accelerate the growth of the companies it purchased by more than 40 percent over the two years following the acquisition in some cases. This is a typical product distribution synergy. Situation #2: In 2010, Apple decided to buy Siri, its now famous voice assistant. And in 2014, it decided to purchase Beats Electronics which had just launched a music streaming business. Both acquisitions were motivated by similar reasons. Rationale: In both the Siri and Beats cases, Apple had the capabilities to develop the technology / product it was purchasing itself. It could have built its own voice assistant, and its own music streaming business. But it decided not to. The reason they thought it would be better to buy a competitor is that it was going to enable them to offer these solutions to their customers QUICKER. To be more precise, they probably estimated that offering these products quicker was worth more money than the savings they would make by developping the technology on their own. This is a typical revenue synergy that's widespread in the technology space. Situation #3: Volkswagen, Audi and Porsche have been combined companies since 2012. Mergers are common in the automative industry and usually motivated by a central reason. Rationale: The cost to develop a new car platform is really high. It takes years, hundreds of people and millions of dollars. By belonging to the same group, Volkswagen, Audi and Porsche can actually share car platforms and reuse them for different models with different brands. For instance, the Audi Q7, the Porsche Cayenne and the VW Tourage all run on the same underlying platform. This is a typical cost synergy. Acquisitions are high-stake situations during which CEOs often feel they need the support of consultants. You should therefore expect to come across M&A cases at some point during your interviews. That being said, your interviewer won't expect you to be an M&A expert. Having a high-level understanding of what motivates companies to buy each other as well as knowing the framework listed above should be sufficient M&A knowledge. After all, M&A cases, are normal case interviews. What will determine if you succeed or not is your ability to think and communicate in a structured way, not your detailed knowledge of how M&A works. So it's a good idea to spend some time on M&A cases, but don't let it distract you from your broader case interview preparation. Mock interviews The best way to improve at case interviews is to practise interviewing out loud, and you can do that in three main ways: Interview yourself (out loud) Practise interviewing with friends or family Practise interviewing with ex-interviewers Practising by yourself is a great way to get started, and can help you get more comfortable with the flow of a case interview. However, this type of practice won’t prepare you for realistic interview conditions.  After getting some practice on your own, you should find someone who can do a mock interview with you, like a friend or family member. We’d also recommend that you practise 1-1 with ex-interviewers from top consulting firms . This is the best way to replicate the conditions of a real case interview, and to get feedback from someone who understands the process extremely well. Click here to book your mock case interview. 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Today’s lawyers and mental health: Mental Health Awareness Month Explore what generative AI can do for your professional work Proven marketing strategies for criminal defense lawyers 102 IMAGES Ace Your M&A Case Study Using These 5 Key Steps M&A Case Study Assignment M& A M&A Case Study PowerPoint How to approach a M&A case interview! The Ultimate Guide to Merger & Acquisition Case Interviews VIDEO [SVNĐ 10.0] M&A Case study: Viettel and Vinaconex M&A Case Study: Digital Marketing Agency Expect M&A activity to be 'quite strong' this year: Investor How Mergers and Acquisitions Impact Share Prices (Hindi) #StockMarket H.J Heinz M&A Case Solution & Analysis- Caseism.com Budget 2022 expectations on M&A Tax COMMENTS Merger & Acquisition Case Interview: Step-by-Step Guide Learn how to solve merger and acquisition (M&A) cases in consulting interviews with this step-by-step guide. Find out the two types of M&A cases, the five steps to follow, the perfect M&A framework, and some examples and resources. A blueprint for M&A success Learn how to develop a systematic M&A strategy based on self-assessment, market assessment, and boundary conditions. See how to identify and execute on M&A themes that align with corporate goals and capabilities. Lessons from Eight Successful M&A Turnarounds Learn how Groupe PSA, Sanofi, and other companies transformed underperforming assets through M&A. The article identifies four key factors that lead to success in turnaround deals: full potential, value rationale, speed, and culture. 25 Biggest Mergers and Acquisitions in History (Top M&A Examples) 25 Biggest Mergers and Acquisitions in History (Top M&A ... Technology M&A case study Learn how Dell and EMC completed the largest technology M&A deal ever with Deloitte's help. See how they created the next tech icon with a value prioritization framework, digital tools, and cross-functional collaboration. PDF Ultimate Guide to M&A: Microsoft + LinkedIn Case Study Ultimate Guide to M&A: Microsoft + LinkedIn Case Study Case Interview Frameworks: Mergers & Acquisitions Mergers and Acquisitions. These cases can be some of the scariest because you feel tested on various finance principles and market intricacies, but on the other hand, they're really easy to recognize. The most important part of an M&A question is knowing what type of acquirer you are dealing with. All acquirers will want to increase cash flow ... Technology M&A case study It was a technology M&A case study like no other that required a team of consummate professionals like no other. Between Dell, EMC, and Deloitte, the entire project was an exercise in collaboration, innovation, and thoughtful strategic planning. The end result made history and solidified the new company and its participants in the annals of the ... Breaking down the M&A Case Study Breaking down the M&A Case Study. M&A case framework. Now that you have a high-level understanding of why companies buy each other in the first place (refer to M&A deals - benefits and drawbacks), let's discuss the framework you should use to analyze the transaction. Firms typically look at four areas when working on M&A cases. Ace Your M&A Case Study Using These 5 Key Steps A typical M&A case study interview would start something like this: The president of a national drugstore chain is considering acquiring a large, national health insurance provider. The merger would combine one company's network of pharmacies and pharmacy management business with the health insurance operations of the other, vertically ... M&A Insights The seven habits of programmatic acquirers. August 24, 2023 -. Our latest research shows that programmatic acquirers continue to create value from this approach to M&A and identifies the capabilities and practices these companies use to deliver their M&A strategies. M&A Insights & Services Learn how EY can help you with M&A, divestitures and joint ventures. Find M&A case studies, sector insights, tools and more. Deciphering the M&A Case Study Framework: A Comprehensive Guide The M&A case study framework is complex, but by understanding the key factors that contribute to a successful transaction, companies can execute M&A deals that create long-term value. The critical success factors for M&A transactions include a well-designed M&A strategy, due diligence, proper financial analysis, and effective post-merger ... Top M&A trends in 2024: A blueprint for success Top M&A trends in 2024: A blueprint for success M&A Case Study: Amazon and Zappos In this Case Study module we will discuss three key aspects of understanding a real-life Mergers & Acquisitions (M&A) deal: We will take a deep look into the large M&A deal that took place in the eCommerce sector. In November 2009, Amazon, Inc. completed a previously announced acquisition of Zappos.com, Inc. Under the terms of the deal, Amazon ... M&A: The One Thing You Need to Get Right M&A: The One Thing You Need to Get Right M&A case interviews overview Acquisitions are exciting and make for great headlines, but the decision to pursue one is serious business - and makes for a great case interview topic! For example, consider mega deals like Salesforce acquiring Tableau for $15.7B or Kraft and Heinz merging at a combined valued of $45B. Mergers and acquisitions (often abbreviated as M&A) are ... The Case for M&A in a Downturn The Case for M&A in a Downturn. Summary. As companies begin planning for a post-Covid future, there may be opportunities to make one or more long-sought acquisitions. Deal premiums are likely to ... Global M&A Report 2024 Global M&A Report 2024 M&A Insights & Services M&A. M&A, divestitures and JVs can fuel growth. A clear strategy, sourcing the right deal, sound diligence and smooth integration are crucial. Whether pursuing scale, new technology or entry into new markets, we can help you achieve your strategic objectives through mergers and acquisitions (M&A), divestitures and joint ventures. Mergers and acquisitions (M&A) in case interviews Employers. Career Events. Consulting Jobs. Consulting Blog. M&A is often the answer to broader problems presented in your case studies. Learn the key areas to analyze: assets, target, industry, and feasibility! <span>Realizing M&A value creation in US banking and fintech: Nine While top performers have realized substantial returns on M&A, value-creating M&A has proven elusive for many US banks (Exhibit 2). Since the financial crisis, the total return to shareholders (TRS) of acquiring banks has underperformed the banking industry index by a median of 320 basis points a year. 4 And two of the most important deal types have also performed the worst. How to master M&A consulting case studies? Partners at McKinsey, BCG and Bain typically look at 4 areas when working on M&A cases. Let's step through them one by one and list the questions you'd want to answer in each. 1. The market. The first area consultants typically analyse in M&A cases is the market. Merger agreement: Definition, case example, and templates A key case that shows the importance of a merger agreement is Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. (1986). In this case, Revlon, a cosmetics company, was subjected to a hostile takeover wherein the Delaware Supreme Court ruled that it is of pivotal importance that when a company decides to sell or merge, the board's duty is to ... essay homework paper phd project resume review study thesis