M&A, Merger Models: Concepts and
Overview 2024/2025 Exam Questions
and Verified Answers | Already Graded
A+
1. Why would one company want to buy another company? - 🧠ANSWER
✔✔One company will want to buy another company if it believes it will be
better off after the acquisition takes place. For example:
• The Seller's asking price is less than its Implied Value, i.e. the Present
Value of its future cash flows.
• The Buyer's expected IRR from the acquisition exceeds its WACC.
Buyers often acquire Sellers to save money via consolidation and
economies of scale, to grow geographically or gain market share, to
acquire new customers or distribution channels, and to expand their
products.
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, - Deals are also motivated by competition, office politics, and ego.
2. How can you analyze an M&A deal and determine whether or not it
makes sense? - 🧠ANSWER ✔✔- The qualitative analysis depends on the
factors above: Could the deal help the company expand geographies,
products, or customer bases, give it more intellectual property, or improve
its team?
- The quantitative analysis might include a valuation of the Seller to see if
it's undervalued, as well as a comparison of the expected IRR to the
Buyer's WACC.
- Finally, EPS accretion/dilution is very important in most deals because
few Buyers want to execute dilutive deals; investors focus tremendously on
near-term EPS, so dilutive deals tend to make companies' stock prices
decline.
3. Walk me through a merger model (accretion/dilution analysis). -
🧠ANSWER ✔✔- In a merger model, you start by projecting the financial
statements of the Buyer and Seller. Then, you estimate the Purchase Price
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
Overview 2024/2025 Exam Questions
and Verified Answers | Already Graded
A+
1. Why would one company want to buy another company? - 🧠ANSWER
✔✔One company will want to buy another company if it believes it will be
better off after the acquisition takes place. For example:
• The Seller's asking price is less than its Implied Value, i.e. the Present
Value of its future cash flows.
• The Buyer's expected IRR from the acquisition exceeds its WACC.
Buyers often acquire Sellers to save money via consolidation and
economies of scale, to grow geographically or gain market share, to
acquire new customers or distribution channels, and to expand their
products.
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, - Deals are also motivated by competition, office politics, and ego.
2. How can you analyze an M&A deal and determine whether or not it
makes sense? - 🧠ANSWER ✔✔- The qualitative analysis depends on the
factors above: Could the deal help the company expand geographies,
products, or customer bases, give it more intellectual property, or improve
its team?
- The quantitative analysis might include a valuation of the Seller to see if
it's undervalued, as well as a comparison of the expected IRR to the
Buyer's WACC.
- Finally, EPS accretion/dilution is very important in most deals because
few Buyers want to execute dilutive deals; investors focus tremendously on
near-term EPS, so dilutive deals tend to make companies' stock prices
decline.
3. Walk me through a merger model (accretion/dilution analysis). -
🧠ANSWER ✔✔- In a merger model, you start by projecting the financial
statements of the Buyer and Seller. Then, you estimate the Purchase Price
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
