M&A Interview Questions

M&A questions test deal judgment as much as mechanics. Accretion and dilution, purchase accounting, synergies, and process questions like auctions and poison pills all show up here.

18 questions

Advanced questions

Superday-level questions with full model answers.

All practice questions

What is a tuck-in / bolt-on acquisition, and why does its value creation come primarily from multiple arbitrage and operating leverage rather than standalone growth?
  • Define the difference between a strategic acquirer's and a financial buyer's motivation for an acquisition, and explain why this difference typically caps how much a financial buyer can bid relative to a strategic in a competitive auction.
  • Distinguish a horizontal acquisition from a vertical acquisition, and give one plausible synergy source specific to each.
  • A target has a $600M standalone equity value. A strategic acquirer identifies $100M of after-tax annual synergies and applies its own 9.0x multiple to value them, willing to share 50% of that synergy value with the seller. Compute the maximum premium and total price the strategic could justify.
  • Explain why a genuine 'merger of equals' is rare in practice, and name three specific deal terms you would examine to determine which party actually controls the combined company.
  • Why do take-private transactions typically require a go-shop provision and a fairness opinion in a way that a private tuck-in acquisition does not, and what real-world risk does this add to deal timeline and certainty of close?
  • Describe 'defensive M&A' as a motivation category distinct from synergy-driven value creation, and give an example of an industry dynamic where it would be the primary rationale for a deal.
  • A PE-backed platform trading at an implied 11.0x multiple acquires a tuck-in with $6M of EBITDA for $33M (5.5x), and eliminates $1.5M of the tuck-in's standalone overhead upon integration. Compute the value created from the transaction.
  • A public target has $350M of EBITDA, $300M of net debt, and an implied standalone equity value of $2,500M. A PE sponsor bids a 30% premium in an all-cash take-private with a standard go-shop. During the go-shop, a horizontal strategic competitor identifies $90M of after-tax annual synergies at its own 8.5x multiple, but antitrust counsel estimates 35% of those synergies are at risk of a required divestiture. Compute the strategic's antitrust-adjusted maximum bid (sharing 50% of adjusted synergy value with target shareholders, on top of a standalone valuation equal to the sponsor's pre-premium value) and compare it to the sponsor's offer.
  • Explain, with reference to leverage capacity, required IRR, and MoIC benchmarks, why a financial buyer targeting a 20% IRR over a 5-year hold is structurally constrained in what it can bid relative to a strategic acquirer with a genuine, quantifiable synergy case. Then describe two specific levers (beyond simply 'paying more') a financial buyer could pull to close that gap.
Why is 'this deal is accretive' not the same statement as 'this is a good deal'? Give a one-sentence explanation an MD would accept.
  • In plain English, without writing a single formula, explain why an acquisition can raise or lower the acquirer's EPS.
  • State the all-stock P/E shortcut for accretion/dilution and explain precisely why it only works for 100% stock deals with no synergies.
  • An acquirer earning a 6% earnings yield buys a target with a 4% earnings yield at the offer price, funded entirely in stock. Is the deal accretive or dilutive, and why?
  • Explain, using the earnings-yield framework rather than a formula, why an all-cash deal funded from a low-interest bank account is almost always accretive.
  • A target's headline P/E looks cheap relative to the acquirer's, but the acquirer is paying a 45% control premium. Why might the deal still be dilutive despite the favorable-looking multiple comparison?
  • Target net income is $90M, bought for a $1,500M equity purchase price, funded 50% with new debt at 7% pre-tax and 50% with cash on hand earning 2.5% pre-tax; tax rate 25%. Using only the earnings-yield intuition (no share count math needed), is this accretive or dilutive, and by roughly how much (state the spread in percentage points)?
  • An acquirer at a 22x P/E considers two potential targets, both earning $50M of net income: Target X priced at 14x, Target Y priced at 26x, both all-stock deals with no synergies. Explain the direction of accretion/dilution for each, and then explain why an interviewer might follow up by asking whether the 22x acquirer's own valuation is 'expensive' or 'cheap' relative to fundamentals, and why that question matters beyond the arithmetic.
  • A board is told a proposed all-debt-financed deal is accretive by 3%, driven entirely by a low borrowing rate, with the target priced at a full 25x multiple. Explain the specific risk the year-one accretion number is hiding, and what additional analysis you would present alongside it.
  • Rates rise sharply, simultaneously increasing the acquirer's cost of debt and compressing the acquirer's own trading multiple. Using the earnings-yield framework, explain qualitatively what happens to the accretion math for (a) a debt-financed deal and (b) a stock-financed deal, and why the two do not necessarily move in the same direction by the same amount.
Walk me through how each of the three financing sources (cash on hand, new debt, and new stock) affects pro forma EPS, and where each one shows up in the accretion/dilution build.
  • An acquirer trading at 18x P/E buys a target for 12x earnings in an all-stock deal with no synergies. Accretive or dilutive, and why does this shortcut work only for all-stock deals?
  • Why do you multiply interest expense, foregone interest income, and synergies by (1 - tax rate) in the pro forma net income build?
  • Acquirer: $400M net income, 100M shares, $80 share price. It buys a target with $60M of net income for $900M, all cash, funded with new debt at 6% pre-tax; tax rate 25%. Compute year-one accretion/dilution in percent.
  • Rank cash, debt, and stock from cheapest to most expensive financing source for a typical acquirer, and describe a realistic scenario in which stock becomes the cheapest of the three.
  • Your MD says: 'The deal is 8% accretive, so it's clearly a good deal.' Give the two-part pushback an elite-boutique analyst should be ready to deliver, including how you would test whether the premium paid is justified.
  • Acquirer: EPS $3.00, share price $45, 300M diluted shares. Target: 150M shares at $20, acquired at a 40% premium, 60% stock / 40% new debt at 7.5%; target net income $250M; tax rate 25%. Compute pro forma EPS and the accretion/dilution percentage.
  • A 100% debt-funded cash deal at a 9% pre-tax coupon and 21% tax rate is exactly EPS-neutral. What P/E did the acquirer pay for the target, and what happens to the breakeven P/E if the tax rate rises to 30%? Explain the direction intuitively.
  • A deal is +5% accretive on management's 'cash EPS' but -2% dilutive on GAAP EPS. What deal items most likely explain the gap, which measure would you present to the board, and how would you defend that choice against a skeptical director?
  • Mid-negotiation, rates rise and the acquirer's new-debt coupon moves from 5% to 8% while its P/E compresses from 22x to 16x (tax rate 25%). For a target being bought at 14x earnings, does the optimal financing shift toward stock or debt on pure year-one EPS math? Show the comparison.
What are 'costs to achieve,' what magnitude is typical relative to run-rate synergies, and why does ignoring them flatter year-one deal math?
  • Define revenue synergies and cost synergies, give two concrete examples of each, and explain why the market systematically gives more credit to cost synergies.
  • A deal announces $75M of pre-tax run-rate cost synergies. With a 25% tax rate and a 10% capitalization rate, what premium could the buyer justify on synergies alone?
  • Explain the statement: 'The premium determines who captures the synergies.' Include the synergies-paid-away formula and what it means when the ratio exceeds 100%.
  • Management claims $150M of revenue synergies from cross-selling. Walk through how you would convert that claim into a bankable EBIT number, naming every haircut you would apply and why.
  • Give three ways synergy estimates are commonly inflated or double-counted in deal models, and how a skeptical advisor would scrub each one.
  • A merger is dilutive by $0.12 of EPS on 520M pro forma shares; the tax rate is 25%. Synergies phase in 40%/80%/100% over three years. What run-rate pre-tax synergies are needed for EPS neutrality at full run-rate, and is the deal accretive in year two at that level? Show the math.
  • Buyer pays a $900M premium for a target, citing $80M of pre-tax cost synergies and $100M of revenue synergies at a 30% incremental margin (tax rate 25%, capitalization rate 8%, costs to achieve $100M). Compute the value created or destroyed for the buyer under (a) full credit to both categories and (b) full cost / zero revenue credit, and state what you'd tell the board.
  • Two bidders compete for the same asset: a strategic with $130M of pre-tax synergies and a sponsor with none, but the sponsor can lever to 6.5x EBITDA. Explain, with a framework for each bidder's maximum price, why the strategic should usually win, and describe a realistic scenario where the sponsor wins anyway.
  • Your client's deal thesis requires 100% of both cost and revenue synergies just to break even against the premium. Construct the advisory argument: what does this imply about value transfer, what restructuring of price or consideration would you propose, and at what point do you advise walking away?
What happens to the target's existing goodwill and its historical equity accounts on the pro forma balance sheet, and why?
  • State the goodwill formula in both its short form and its expanded bridge form (starting from target book equity), and explain what goodwill economically represents.
  • Buyer pays $900M for a target with $400M of book equity and no existing goodwill; PP&E is written up $50M and $150M of identifiable intangibles are recognized; ignore taxes. Compute goodwill.
  • Contrast the post-close accounting treatment of goodwill versus acquired finite-lived intangibles, and explain how each affects GAAP EPS versus 'cash EPS' for a serial acquirer.
  • Walk through a $300M goodwill impairment across all three financial statements (assume it is not tax-deductible), and explain why the market often barely reacts to the announcement.
  • Explain the inventory step-up and the classic deferred revenue haircut: what causes each, how each hits the post-close P&L, and how management typically presents them.
  • You pay $2,400M for a target with $900M of book equity including $250M of old goodwill. Write-ups: PP&E +$180M, new intangibles +$420M; stock deal; tax rate 25%. Compute the DTL, the fair value of net identifiable assets, and goodwill, then recompute goodwill assuming a 338(h)(10) election and explain the difference.
  • An acquirer books a $60M earn-out at fair value at close. The target then beats its milestones and the earn-out's fair value rises to $95M before payment. Walk through where the $35M change appears in the financial statements and why GAAP treats it that way. Then explain what happens if the earn-out is instead settled in a fixed number of shares.
  • You acquire a distressed lender for $350M when the fair value of its net identifiable assets is $520M. Walk through the required accounting steps, compute the income statement effect, and explain how you would treat this item in year-one accretion/dilution and in your advice to the board.
  • A CFO argues the deal model should amortize goodwill over 10 years 'to be conservative.' Explain what current US GAAP actually requires, what the private-company alternative allows, and how you would model the deal's EPS impact both ways for the board.
Explain why a DTL is created in a stock acquisition but not in an asset acquisition (or a 338(h)(10)/336(e) election), in terms of book basis versus tax basis.
  • Define a deferred tax liability in the context of an M&A write-up, and state the formula for computing the DTL created by a fair-value write-up.
  • A target's inventory is written up by $40M and its PP&E by $100M in a stock deal, tax rate 25%. Compute the DTL created.
  • Explain why goodwill is not tax-deductible in a typical stock deal but IS tax-deductible over 15 years in an asset deal, and why a buyer might therefore be willing to pay a higher price for the same target under an asset-deal structure.
  • Walk through how a DTL created at close 'reverses' over time, and explain where that reversal appears in a three-statement model (which statement, which line).
  • What is Section 382, and why does an acquired company's NOL carryforward often become less valuable to the acquirer than its face value would suggest?
  • A stock deal creates a $180M DTL (from $720M of combined write-ups, 25% tax rate). The same target, if acquired in an asset deal, would generate no DTL but goodwill would instead be $180M lower and tax-deductible over 15 years. Compute the annual cash tax shield from the asset-deal goodwill amortization if total goodwill in that scenario is $1,050M, and explain which structure a financial buyer paying an identical enterprise value would prefer, and why a seller might resist it.
  • A target carries a $500M NOL. At the ownership change its equity value is $1,800M and the applicable long-term tax-exempt rate is 4.5%. Compute the annual Section 382 limitation, determine how many years it would take to fully utilize the NOL absent any expiration, and explain how a valuation allowance would change your DTA recognition if you believed only 60% of the NOL would ultimately be used before expiring.
  • In a stock deal, PP&E is written up $250M and new intangibles of $650M are recognized, tax rate 25%. Compute the DTL, then compute the year-one DTL reversal assuming the PP&E write-up depreciates over 10 years and the intangibles amortize over 8 years. Explain precisely where this year-one reversal appears in unlevered free cash flow versus levered free cash flow.
  • A private-equity buyer is acquiring an S-corp target and can freely elect 338(h)(10) treatment without triggering the classic 'double tax' problem that a C-corp seller would face. Explain why this structural fact makes the step-up election far more likely to be used here than in a large public company stock-for-stock merger, and quantify (in general terms) what changes in the goodwill build and the acquirer's post-close cash taxes.
Explain why the target's historical equity accounts are eliminated on the pro forma balance sheet rather than combined with the acquirer's.
  • Starting from an acquirer's and a target's standalone balance sheets, list in order the adjustments needed to build the pro forma combined balance sheet for a deal.
  • Acquirer has $200M cash and $600M other assets, no debt, $700M equity. Target has $40M cash, $260M other assets (fair value = book), $300M equity. Acquirer pays $300M cash for the target (no premium). Build the combined balance sheet and confirm it balances.
  • Distinguish how advisory/legal fees versus new-debt financing fees are treated on the pro forma balance sheet, and explain the accounting rationale for the difference.
  • Explain the difference between a fixed-exchange-ratio stock deal and a fixed-value stock deal in terms of which party bears the risk of the acquirer's share price moving between signing and close.
  • What is the ASC 805 'measurement period,' and how does a fair-value revision discovered within that period get reflected on the balance sheet differently than one discovered after it closes?
  • Acquirer pays $700M for a target: $400M new debt, $200M new stock issued at fair value, $100M cash. Target's book equity is $280M including $30M of old goodwill. PPA: PP&E write-up $40M, new intangibles $110M, tax rate 25% (stock deal). A $12M advisory fee is expensed in cash and a $6M financing fee is capitalized. Build the full pro forma balance sheet adjustments (goodwill, DTL, cash, equity) and confirm the balance sheet balances.
  • A fixed-value stock deal promises target shareholders $600M of stock. At signing the acquirer trades at $30/share; at close it trades at $24/share. Compute the number of shares issued at close, explain the dilution consequence for the acquirer's existing shareholders relative to the signing-date expectation, and explain how a collar could have limited this outcome.
  • A deal includes a $40M net working capital peg. Actual closing NWC comes in $15M above the peg, increasing the purchase price by $15M paid in cash at close. Separately, nine months later (within the measurement period), an appraisal revises a PP&E write-up down by $10M. Walk through both adjustments' effects on goodwill, explaining why they are mechanically distinct even though both ultimately move the same line.
  • An acquirer sizes new acquisition debt as 4.0x pro forma EBITDA, where pro forma EBITDA includes run-rate cost synergies that are themselves an assumption in the model, and the resulting debt quantum feeds into the purchase price the target will accept. Explain why this creates circularity in the pro forma balance sheet build and describe how you would resolve it in a live Excel model.
State the intuitive P/E-arbitrage rule for when an all-stock deal is accretive versus dilutive to the acquirer's EPS, with no synergies assumed.
  • Acquirer trades at 24x earnings; target trades at 15x earnings with $100M of net income. Acquirer offers a 20% premium in an all-stock deal. Is the deal accretive or dilutive on a no-synergy basis? Show the deal-implied P/E paid.
  • List every term that belongs in the pro forma EPS numerator and denominator for a mixed cash/stock/debt deal, and state which terms are after-tax.
  • Derive the formula for breakeven premium in an all-stock, no-synergy deal, and explain in words what it represents.
  • Explain why debt-funded acquisitions are accretive far more easily than stock-funded acquisitions, and why this makes a bare 'is it accretive' question a weak test of deal quality for debt deals specifically.
  • A stock deal is dilutive by $25M of after-tax net income at the proposed price. Tax rate 21%. Compute the pre-tax run-rate synergies required to reach exact EPS breakeven, and explain why you gross up by (1 - tax rate) rather than crediting the synergy figure as stated.
  • Acquirer trades at 19x earnings, EPS of $6.00, 200M shares. Target has net income of $180M and currently trades at 13x earnings. Acquirer proposes an all-stock deal at a 35% premium. Compute the deal-implied P/E paid, determine accretion/dilution, and then compute the exact breakeven premium (holding synergies at zero) at which the deal-implied P/E would equal the acquirer's own P/E.
  • An acquirer funds a $4,000M acquisition with 50% new debt at 5.5% pre-tax and 50% cash on hand earning 2.5% pre-tax, tax rate 25%. The target contributes $260M of net income. Purchase accounting adds $50M of annual pre-tax incremental D&A. Compute pro forma net income and determine whether the deal is accretive given the acquirer's standalone net income of $1,500M and 120M shares outstanding (no new shares issued, since it's debt/cash funded).
  • A board is being pressured to raise its all-stock offer from a 25% premium (which is EPS breakeven with zero synergies) to a 40% premium to beat a rival bidder. Management says $85M of pre-tax synergies 'easily' covers the gap. Walk through how you would test whether that synergy claim is credible, including how the cost-vs-revenue synergy mix and execution risk should change your confidence, and explain what analysis you'd run in parallel to accretion/dilution before advising the board on the higher premium.
  • Compare the GAAP accretion/dilution outcome to the 'cash EPS' (excluding deal amortization) outcome for a stock deal where after-tax incremental D&A from write-ups is $45M and the deal is GAAP-dilutive by 2% but cash-accretive by 1.5%. Explain why management might emphasize the cash EPS figure publicly, and what a skeptical analyst should ask in response.
Walk me through a two-stage sell-side auction process from engagement to closing, naming the key documents at each stage.
  • What is the difference between a teaser and a CIM, and why does the NDA sit between them?
  • Why are signing and closing separate events, and what typically has to happen in between for a public target?
  • What does a buy-side advisor actually do for an acquirer during an auction, and how do its incentives differ from the sell-side advisor's?
  • A seller can run a broad auction, a targeted auction, or an exclusive negotiation. Give the trade-offs of each and describe a situation where the exclusive negotiation is the right call.
  • Final bids arrive with different SPA markups and financing packages. Explain the three dimensions on which a seller evaluates final bids, and why the highest headline price does not always win.
  • Compare a one-step merger to a two-step tender offer for acquiring a public company: mechanics, timeline, and when each is preferred. Why did LBO take-privates historically favor the one-step structure?
  • Your sell-side client receives a pre-emptive bid at a full valuation before the auction launches, conditioned on 30 days of exclusivity. The bidder is her largest competitor. Lay out how you would advise her, including at least three specific protections you would negotiate before granting exclusivity.
  • Public target, unaffected price $50. Bid A: $70 cash from a strategic with a 75% probability of clearing antitrust in 12 months and a $3/share reverse termination fee; if blocked, the stock returns to $52. Bid B: $65 cash from a sponsor with committed financing, 98% close probability in 4 months. Using a 10% annual discount rate, compute the risk-adjusted present value of each bid, recommend one, and then solve for the reverse termination fee that would make you indifferent.
  • A sponsor take-private signs with a 35-day go-shop, a 1.5% breakup fee during the go-shop stepping to 3.0% after, and 4-business-day matching rights. On day 20 a strategic submits a bid 6% above the deal price. As advisor to the target board, walk through the sequence of decisions and obligations from that moment to a final outcome, including how the fee and matching rights shape the strategic's effective cost.
Explain how a poison pill (shareholder rights plan) actually works mechanically: what triggers it and what happens to the acquiring shareholder's stake.
  • List, in escalating order, the steps a hostile bidder typically takes after a private acquisition approach is rejected by a target's board.
  • A target agrees to a $2,800M sale with a $98M breakup fee. Is this fee within the typical market range? Show the percentage.
  • Explain the difference between a staggered (classified) board and a poison pill as takeover defenses, and why the combination of the two is historically considered especially effective against hostile bidders.
  • What are the Unocal and Revlon standards in Delaware corporate law, and how do they constrain a target board's ability to reject a hostile bid or resist a topping bid after signing a friendly deal?
  • Distinguish a standard (target-paid) breakup fee from a reverse breakup fee: who pays each, what circumstances typically trigger each, and why reverse breakup fees are often larger as a percentage of deal value.
  • A target has 80M shares outstanding and adopts a poison pill with a 12% trigger. A hostile bidder crosses the trigger by acquiring 12.5% of shares. If the pill causes all non-triggering shareholders' share count to increase by 80% via discounted purchases, compute the bidder's diluted ownership percentage after the pill triggers, and explain why the bidder would rationally avoid crossing the trigger in the first place absent a board waiver.
  • A signed merger agreement has a $150M target-paid breakup fee on a $5,000M deal, no go-shop, and a 5-business-day matching right for the original acquirer. A competing bidder emerges 30 days after signing with a fully financed offer of $5,400M. Walk through the board's fiduciary obligations under the no-shop's fiduciary out, compute the net proceeds to target shareholders if the original acquirer does not match and the board switches, and explain what feature of this deal-protection package is most exposed to a Revlon-based legal challenge.
  • An acquirer proposes a reverse breakup fee of 9% of deal value tied specifically to antitrust-clearance failure on a deal with real regulatory risk, versus a rival bidder in the same auction offering only a 3% RBF for the identical risk. Explain what each RBF size signals about the respective bidders' confidence in clearance, and describe a scenario where offering the larger RBF would actually be a value-destructive decision for the acquirer offering it.
  • A target board is considering deploying greenmail against a hostile bidder who has accumulated a 12% stake, versus instead adopting a 'just in time' poison pill. Explain why greenmail is now rarely used compared to decades ago, and walk through why a board can often adopt an effective poison pill within days of a bear hug letter even if it has no standing pill in place beforehand.
What is the accretion/dilution formula, and what changes between a cash-financed deal and a stock-financed deal in the pro forma share count and pro forma net income?
  • Name the six stages of building a merger model in order, and explain why each stage depends on the one before it.
  • Walk through how you compute the equity purchase price for a public target, including why the treasury stock method must be re-run at the offer price rather than the current price.
  • Acquirer standalone EPS is $4.00 on 250M shares. It pays $600M all cash for a target with $60M of net income, funded from cash earning 2.5% pre-tax, tax rate 25%, ignore PPA. Compute pro forma EPS and the accretion/dilution percentage.
  • Explain the reciprocal P/E rule for an all-stock, no-synergy deal, and then explain how introducing cash/debt financing changes the comparison from 'target P/E vs acquirer P/E' to 'target earnings yield vs after-tax cost of financing.'
  • Why do models typically phase in synergies over two to three years rather than assuming the full run-rate amount in year one, and what year-one distortions would result from ignoring the phase-in?
  • Explain why accretion/dilution is not the same thing as value creation, and describe at least two ways a deal can be accretive to EPS while still destroying shareholder value.
  • Acquirer trades at 18x earnings and funds an all-stock acquisition of a target trading at 11x earnings, no synergies. Separately, compute whether an all-cash deal funded with debt at 6% pre-tax (25% tax rate) would be more or less accretive than the stock deal, and explain the intuition for the difference.
  • Purchase price $2.5B, target existing debt of $300M must be refinanced, fees $50M. Financing: $800M cash, $1.2B new debt, remainder in stock at a $40 acquirer share price. (a) Solve for the stock component and shares issued. (b) If the board caps pro forma Net Debt/EBITDA at 3.5x, and pro forma EBITDA (combined plus $50M run-rate synergies) is $900M, does this financing plan satisfy the constraint given acquirer standalone net debt of $1.4B?
  • A deal shows +9% year-one EPS accretion driven mostly by cheap acquisition debt (5% pre-tax) against a target earnings yield of 9%. Rates subsequently rise and the debt must be refinanced in year four at 8.5% pre-tax. Explain, with the underlying math, why the deal's accretion profile is at risk, and what you would have flagged to the board at signing to pre-empt this.
Explain why signing and closing are separate events, and name at least three things that can change in a model's assumptions between them.
  • Name the four broad strategic rationales for an acquisition and explain how each changes what the market and the model should scrutinize most closely.
  • State the reciprocal P/E rule for an all-stock, no-synergy deal, and explain how it changes when the deal is instead financed with cash and debt.
  • Walk through why cost synergies are generally weighted more heavily than revenue synergies in accretion/dilution and breakeven analysis.
  • Walk through the six stages of a full merger-model build in order and explain, for each stage, one thing that would have to be redone if the interviewer changed the financing mix midway through.
  • A friendly deal turns into a contested auction when a second strategic bidder emerges. Explain how this changes the effective purchase price, the financing plan, and the synergies you would be willing to credit, and why all three should move together rather than independently.
  • Explain the relationship between the breakeven premium and the breakeven synergies calculations: why are they the same underlying equation, and how would a deal team use each one differently in a live negotiation?
  • Acquirer standalone EPS $3.00 on 400M shares. It proposes an all-stock acquisition of a target with $120M net income at a $50/share acquirer price, crediting $25M of pre-tax cost synergies (fully phased in year one, 25% tax rate). Solve for the maximum equity purchase price that keeps the deal exactly breakeven on EPS, then state the implied maximum premium if the target's unaffected market cap is $1,000M.
  • Midway through a deal's regulatory review, interest rates rise 250bps and the target's normalized earnings are cut 8% by covering analysts. The deal was originally modeled as $1.2B all-debt financed at 5% pre-tax against a target earnings yield of 9% (25% tax rate). Recompute the after-tax spread before and after these changes, and explain what specific contractual protections (from the process and defenses material) the acquirer should have negotiated at signing to guard against exactly this scenario.
  • A target board adopts a poison pill and a staggered board in response to an unsolicited bid at a 20% premium. The acquirer's model shows the deal is only accretive up to a 35% premium given current financing and no synergies credited. Walk through how you would advise the acquirer to respond, including how a go-shop-like negotiated outcome, a proxy fight, and a raised bid with newly credited synergies would each change the price ceiling you calculated, and which path you would recommend and why.