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GUEST COMMENT: Three questions that will determine whether you’re good enough to work in M&A - and how to answer them

Corporate finance interviews can be frightening: the hugely competitive process, the overworked and sleep deprived interviewer, the almost infinite number of possible challenging technical questions.

However, you can make the experience more manageable. In any M&A interview, there are some interview questions that will come up time and time again. If you can answer these, you will have a head start.

Before you walk into any interview for an M&A position, you should therefore know what to say when you’re asked any of the following:

1. Why do you want to work in M&A, and why for us?

This is a seemingly straightforward test of your motivation and knowledge of the role. But it’s also very easy to mess up. M&A is hard work: you must convince your interviewer that you are up to the challenge.

How can you do this? It’s ok to refer to the fact that the job pays well, but focus on why the work itself will motivate you. Talk about your interest in how companies work, in what makes them successful and how they evolve through acquisitions and disposals.

However, the best answers also demonstrate a real understanding of what a corporate financier does. Therefore, tell your interviewer how much you’ll enjoy the research, the pitch preparation the financial modelling. But for top marks, talk about how the job ultimately involves giving advice.

The “why us” part of the question is also critical. Your interviewer knows you will be applying to lots of other banks (and don’t be afraid to admit this) but you need to make each one feel special. Find something that stands out -a sector or country focus, a strong culture or brand - and then find a reason why that is particularly attractive to you. Flattery is advisable.

2. Tell me what you know about how to value a company?

This is the dreaded valuation question. The one you stayed up until 2am preparing for. It may end in a sea of acronyms, DCF, WACC, LBO, CAPM, but before you get there try to provide some structure to what you know.

A good place to start is to list the techniques you are aware of:

- Comparable multiples

- Discounted cashflow (DCF)

- Leveraged buyout (LBO)

- Various others e.g. asset valuation, dividend discount models etc.

Then go back and expand on each one systematically from first principles. When your knowledge runs out, just tell them. Don’t pretend you know more than you do.

3.  Tell me about an M&A transaction you have been following, who was involved, why was it happening, was it a good deal?

This should be a gift of a question, but all too often the answers are thin on detail and lacking genuine insight.

There are some basic rules:

-  Don’t pick the most obvious deal. In 2010 every applicant talked about Cadbury & Kraft: it becomes very boring, very quickly.

-  Research transactions you find interesting and then talk about one you know a lot about.

-  Show you have really thought about the deal, not just skimmed a few articles the night before. Offer an opinion, even a controversial one. The interviewer may disagree, but that doesn’t matter.

If you can provide well structured answers to these three questions you should be off to a great start. Then just hope your mental arithmetic doesn’t fail you when asked the square root of 4,000...

Guy Ballantine is a former director of recruitment firm Cornell Partnership and former director at DC Advisory Partners.

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AUTHORGuy Ballantine Insider Comment
  • MD
    MDSuissePB
    29 February 2012

    The real question is only nr (1) <>
    All the rest is bulls#it...

    And the real answer is only one: because of the money !!!
    No one would ever do M&A, be insulted, work very long hours, crunch 50000lines spreadsheets for 40k a year. NO ONE !!!

    I hate this hypocrisy...
    <>.

    C'mon.....get real

  • ci
    cityhag
    27 February 2012

    Are you cheap?
    Are you cheap?
    Are you cheap?

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