M&A MODELLING EXAM ANSWERS
FROM WALL STREET PREP
KEY AREAS TO FOCUS WHILE STUDYING FOR EXAM
1. Understanding the Basics of M&A
● Types of Mergers: Horizontal, Vertical, Conglomerate.
● Reasons for M&A: Synergies, diversification, market share, etc.
● Deal Structures: Stock purchase, asset purchase, mergers, tender offers.
2. Valuation Techniques
● Discounted Cash Flow (DCF) Analysis: Understanding of free cash flows, terminal
value, and discount rates.
● Comparable Company Analysis: Using multiples like P/E, EV/EBITDA, EV/Sales.
● Precedent Transactions Analysis: Historical M&A deals with similar characteristics.
● LBO (Leveraged Buyout) Modeling: Understanding debt structuring and returns to
equity.
3. Financial Modeling
● Building an M&A Model: Integrating the financials of the acquirer and target company.
● Accretion/Dilution Analysis: Assessing the impact of the deal on EPS.
● Pro Forma Financials: Creating pro forma income statement, balance sheet, and cash
flow statement post-acquisition.
● Synergy Analysis: Quantifying potential cost and revenue synergies and how they
impact the deal.
4. Deal Structuring
● Financing the Deal: Cash, stock, debt, or a combination.
● Understanding Purchase Price Allocation: Goodwill, intangible assets, and write-ups.
● Tax Implications: Deferred tax liabilities, NOLs, and other tax considerations.
5. Exam Tips
● Practice with Realistic Scenarios: Use case studies from past M&A deals.
● Understand Key Concepts Thoroughly: Focus on both the technical and strategic
aspects of M&A.
● Timed Practice: Simulate exam conditions to manage time effectively.
FROM WALL STREET PREP
KEY AREAS TO FOCUS WHILE STUDYING FOR EXAM
1. Understanding the Basics of M&A
● Types of Mergers: Horizontal, Vertical, Conglomerate.
● Reasons for M&A: Synergies, diversification, market share, etc.
● Deal Structures: Stock purchase, asset purchase, mergers, tender offers.
2. Valuation Techniques
● Discounted Cash Flow (DCF) Analysis: Understanding of free cash flows, terminal
value, and discount rates.
● Comparable Company Analysis: Using multiples like P/E, EV/EBITDA, EV/Sales.
● Precedent Transactions Analysis: Historical M&A deals with similar characteristics.
● LBO (Leveraged Buyout) Modeling: Understanding debt structuring and returns to
equity.
3. Financial Modeling
● Building an M&A Model: Integrating the financials of the acquirer and target company.
● Accretion/Dilution Analysis: Assessing the impact of the deal on EPS.
● Pro Forma Financials: Creating pro forma income statement, balance sheet, and cash
flow statement post-acquisition.
● Synergy Analysis: Quantifying potential cost and revenue synergies and how they
impact the deal.
4. Deal Structuring
● Financing the Deal: Cash, stock, debt, or a combination.
● Understanding Purchase Price Allocation: Goodwill, intangible assets, and write-ups.
● Tax Implications: Deferred tax liabilities, NOLs, and other tax considerations.
5. Exam Tips
● Practice with Realistic Scenarios: Use case studies from past M&A deals.
● Understand Key Concepts Thoroughly: Focus on both the technical and strategic
aspects of M&A.
● Timed Practice: Simulate exam conditions to manage time effectively.
