The Technical Interview Guide to Investment Banking, + Website

CHAPTER 7Mergers and Acquisitions Questions

1. 1) What is the difference between a merger and a consolidation?

   A merger is the combination of two or more business entities in which only one entity remains. A consolidation is a combination of more than one business entity; however, an entirely new entity is created.

2. 2) What is the difference between a horizontal and vertical transaction?

   A horizontal transaction is between business entities in the same industry, where as a vertical transaction is between business entities operating at different levels within an industry's supply chain.

3. 3) What are a few examples of acquisitions?
   1. Acquisition of assets
   2. Leveraged buyout
   3. Management buyout
4. 4) What are three major ways to facilitate an acquisition?
   1. Acquisition of assets
   2. Acquisition of equity
   3. 338(h)10 election
5. 5) What are examples of other restructurings?
   1. Share buyback
   2. Workforce reduction
   3. Debt reconsolidation
6. 6) What are the key variables impacting EPS in a debt and equity raise, respectively?
   1. Interest rate on debt
   2. Price per share on equity
7. 7) Is an equity raise or a debt raise typically more dilutive to EPS? What are the exceptions to the common rule?

   Equity is typically more dilutive to EPS than debt. If the stock price is overvalued, raising equity can be less dilutive than raising debt. Or if the interest rate is higher than the cost of equity, raising debt can be more dilutive than raising equity.

8. 8) Walk me through an accretion/dilution analysis.

   An accretion/dilution ...