IB Technicals 5: M&A and Accretion Dilution

M&A applies valuation to a live decision: why a company buys another, what it pays, and what the deal does to the buyer. Building is slow and buying is fast. The catch is that the buyer pays a premium, usually twenty to forty percent over where the target already trades, so the deal has to create more value than the market already priced in. Synergies are the argument for that, and cost synergies are the only ones bankers count on. The question that carries the most interview volume in this block is accretion and dilution, and it comes down to one comparison: the earnings you are buying against the cost of the financing you used to buy them. Then the mechanics underneath, starting with goodwill, which appears the moment you pay more than book value. What we'll cover: - Why companies acquire, and why synergies have to exceed the premium - Cost synergies versus revenue synergies, and why bankers only count on one of them - Cash, debt, or stock: which is most accretive, and why - The P/E arbitrage rule, and the earnings yield trick that answers it in your head - Goodwill, and what happens when you write up assets for book but not for tax - The sell-side process, and selling to a sponsor versus a strategic Want to be done with the M&A block? I run a 90-minute mock interview, a full simulation and then rapid-fire technicals on whatever broke. Book a free 15-minute intro to see if it is a good fit. Part 5 of IB Technicals, a six part run on Tuesdays and Thursdays. Each night covers how the concept works and, more importantly, how to actually answer the questions on it, with the stories and details behind them. Each one stands alone, so jump in anywhere. I'm the founder of OFFERGOBLIN and ex-Centerview tech.