m&a case study example

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:

Merger & Acquisition Case Interview Framework Example

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 .

Recommended Consulting Interview Resources

Here are the resources we recommend to land your dream consulting job:

For help landing consulting interviews

Resume Review & Editing : Transform your resume into one that will get you multiple consulting interviews

For help passing case interviews

Comprehensive Case Interview Course (our #1 recommendation): The only resource you need. Whether you have no business background, rusty math skills, or are short on time, this step-by-step course will transform you into a top 1% caser that lands multiple consulting offers.
Case Interview Coaching : Personalized, one-on-one coaching with a former Bain interviewer.
Hacking the Case Interview Book (available on Amazon): Perfect for beginners that are short on time. Transform yourself from a stressed-out case interview newbie to a confident intermediate in under a week. Some readers finish this book in a day and can already tackle tough cases.
The Ultimate Case Interview Workbook (available on Amazon): Perfect for intermediates struggling with frameworks, case math, or generating business insights. No need to find a case partner – these drills, practice problems, and full-length cases can all be done by yourself.

For help passing consulting behavioral & fit interviews

Behavioral & Fit Interview Course : Be prepared for 98% of behavioral and fit questions in just a few hours. We'll teach you exactly how to draft answers that will impress your interviewer.

Land Multiple Consulting Offers

Complete, step-by-step case interview course. 30,000+ happy customers.

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

Thanks for turning to My Consulting Offer for advice on case study interview prep. My Consulting Offer has helped almost 89.6% of the people we’ve worked with get a job in management consulting. We want you to be successful in your consulting interviews too. For example, here is how Kathryn Kelleher was able to get her offer at BCG.

3 Top Strategies to Master the Case Interview in Under a Week

We are sharing our powerful strategies to pass the case interview even if you have no business background, zero casing experience, or only have a week to prepare.

No thanks, I don't want free strategies to get into consulting.

We are excited to invite you to the online event., where should we send you the calendar invite and login information.

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.

Image: Pexels

🔴 Interested in consulting?

Get insights on consulting, business, finance, and technology.

Join 5,500+ others and subscribe now!