Lesson 5 of 12
M&A case interview: framework and worked example
M&A cases ask whether a company should buy or merge with another, and at what price. This lesson gives you a framework for judging any deal, shows how synergies and price fit together, and walks through a full example with real math.
Part 1 of 9
What is an M&A case?
An M&A case asks whether a company should acquire or merge with another business. The buyer might want faster growth, a new capability, a new customer base, or lower costs from combining operations. Almost every M&A case ends with the same question: is the deal worth the price?
M&A cases borrow from other case types. You will judge the target's market the way you would in a market entry case, check its financial health the way you would in a profitability case, and size cost savings the way you would in a cost reduction case.
The skill being tested
The question is not whether the target is a good company. It is whether it is a good deal: will the buyer get more value than it pays, after the costs of putting the two companies together?
Part 2 of 9
How to spot an M&A case
These prompts usually name a specific company or deal. Listen for phrases like these:
- Our client is considering acquiring a competitor
- Should we buy this startup?
- A potential merger with our largest rival
- What is the most we should pay?
- The board received an offer for the company
- Should we sell this division?
If the buyer is a private equity firm rather than a company, the case works differently, since there are no synergies and the focus is on returns. That is covered in the private equity due diligence lesson. Not sure which type a prompt is? The first lesson covers how to identify the case type.
Part 3 of 9
The M&A framework
Four branches. The first two ask whether the target is worth owning. The last two ask whether this deal, at this price, creates value.
- Should we do the deal?
- Target's marketSize, growth, profitability
- Target companyPosition, financials, team
- SynergiesCost savings, extra revenue
- Price and risksValuation, integration, culture
The deal creates value when
- Standalone value
- plus synergies
- is more than price plus integration costs
Cost synergies
Savings from combining operations: one headquarters instead of two, shared warehouses and trucks, better prices from larger purchasing volume. They are usually within the buyer's control, which makes them more reliable.
Revenue synergies
Extra sales the two companies can make together: selling the target's products through the buyer's channels, or cross-selling to each other's customers. They depend on customers behaving as planned, so they are often overestimated.
How to value the target quickly
In a case interview you rarely need a full valuation model. The common shortcut is a multiple: take the target's annual profit (often EBITDA, which is operating profit before depreciation and amortization) and multiply it by what similar companies sell for. If similar companies sell for 10 times EBITDA and the target earns $20M, it is worth about $200M on its own.
Always name a walk-away price
Strong candidates finish an M&A case with the most the buyer should pay, and what they would do if the seller asks for more. That single number shows you understood the deal.
Want to see how this structure compares to the others? The frameworks guide covers them side by side.
Part 4 of 9
How to solve it, step by step
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Clarify the rationale
Ask why the buyer wants this deal and what it hopes to gain: growth, capabilities, customers, or cost savings. Confirm the asking price and any timeline.
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Assess the target's market
Check the size, growth, and profitability of the market the target plays in, and where it is heading.
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Assess the target itself
Look at its market position, customers, financial health, and management team. Estimate what it is worth on its own.
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Size the synergies
Estimate cost and revenue synergies, how likely each one is, and the one-time cost of integrating the two companies.
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Compare value to price and recommend
Add standalone value and net synergies, compare to the price, name the key risks, and give a clear recommendation with a walk-away price.
Part 5 of 9
Worked example: Harbor Foods and GreenLeaf
Try each question on your own before you reveal the answer. Say it out loud if you can, the way you would in an interview.
Case prompt
Your client is Harbor Foods, a packaged snacks company with $900M in revenue. It is considering acquiring GreenLeaf, a fast-growing healthy snacks brand with $100M in revenue. GreenLeaf's owners are asking $400M. Should Harbor buy it?
Question 1
How would you structure this problem?
A strong answer starts by asking why Harbor wants GreenLeaf. Here, Harbor's core snacks are growing slowly, and it wants a foothold in the faster-growing healthy segment. Then it lays out a structure built for this deal:
- Market: how big is healthy snacks, how fast is it growing, and are margins holding up as more brands enter?
- GreenLeaf: how fast is it growing, how profitable is it, how loyal are its customers, and would its founders stay after the deal?
- Synergies: can Harbor cut GreenLeaf's costs with its scale in purchasing and distribution, and can it sell GreenLeaf in more stores?
- Price and risks: what is GreenLeaf worth on its own, what are the synergies worth, and what could go wrong in integration, like losing the brand's appeal inside a big company?
A good candidate then says they want to start with what GreenLeaf is worth on its own, since that sets the baseline for the $400M ask.
Question 2
Using Exhibit 1, what is GreenLeaf worth on its own, and how does that compare to the asking price?
Exhibit 1: GreenLeaf snapshot
| Metric | GreenLeaf |
|---|---|
| Revenue | $100M |
| Revenue growth | 20% per year |
| EBITDA margin | 10% |
| Healthy snacks market growth | 15% per year |
| Comparable brands sell for | 20x EBITDA |
Case data is illustrative.
Standalone value: $10M x 20 = $200M
Gap to asking price: $400M - $200M = $200M
On its own, GreenLeaf is worth about $200M, half the asking price. That does not rule the deal out. It means Harbor would be paying a $200M premium, and the synergies need to be worth at least that much to justify it.
Question 3
Exhibit 2 shows the synergies the team identified. Harbor values annual synergies at 10 times their yearly profit, since they are less certain than GreenLeaf's existing earnings. What is the most Harbor should pay?
Exhibit 2: Synergies
| Synergy | Type | Annual profit impact |
|---|---|---|
| Move GreenLeaf onto Harbor's delivery trucks | Cost | $4M |
| Buy ingredients and packaging at Harbor's volume | Cost | $3M |
| Sell GreenLeaf in 20,000 more grocery stores | Revenue | $30M in sales at a 20% margin |
| One-time integration cost | $20M |
Case data is illustrative.
Total annual synergies: $4M + $3M + $6M = $13M
Value of synergies: $13M x 10 = $130M
Net of integration: $130M - $20M = $110M
Maximum value to Harbor: $200M + $110M = $310M
The most Harbor should pay is about $310M, well below the $400M ask. Paying $400M would hand GreenLeaf's owners about $90M more than the deal is worth to Harbor.
Now test how much depends on the riskiest piece. Without the revenue synergy, synergies are worth $7M x 10 = $70M, or $50M after integration costs, so GreenLeaf is worth about $250M to Harbor. That is the price Harbor can defend even if the extra store sales never show up.
Question 4
The CEO walks into the room. What is your recommendation?
"Harbor should pursue GreenLeaf, but not at $400M. The most the deal is worth to us is about $310M.
On its own, GreenLeaf is worth about $200M, based on 20 times its $10M of EBITDA. Combining the two companies creates about $13M a year in synergies, worth roughly $110M after a $20M integration cost. That puts GreenLeaf's value to Harbor at about $310M, so paying $400M would destroy about $90M of value.
Almost half the synergy value depends on selling GreenLeaf in 20,000 more stores, which is the least certain piece. I'd open around $250M, which is backed by cost savings alone, and walk away above $310M. If the owners won't move, we could bridge the gap with an earn-out: extra payments only if GreenLeaf hits its revenue targets after the deal. As next steps, I'd test the store rollout with a few retail partners and make sure the founders will stay through integration."
Why this works: it gives a clear answer and a walk-away price, separates reliable synergies from risky ones, and offers a way to keep the deal alive without overpaying.
Part 6 of 9
Common mistakes
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Judging the company instead of the deal
GreenLeaf is a great brand, but that does not make $400M a good price.
Instead: compare the value to the buyer against the price paid.
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Counting every synergy at full value
Revenue synergies are often promised and rarely delivered in full.
Instead: separate cost and revenue synergies, and test the deal without the riskiest ones.
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Forgetting integration costs
Combining systems, teams, and facilities costs real money up front.
Instead: subtract one-time integration costs from the synergy value.
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Ignoring people and culture
Many deals fail because key people leave or the cultures clash.
Instead: ask whether the team will stay and how the two companies will work together.
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Ending without a number
"It depends on the price" is not a recommendation.
Instead: give a maximum price and what to do if the seller asks for more.
Part 7 of 9
Variations you'll see
The same framework handles every version below. What changes is which branch carries the most weight.
- Strategic acquisition
- The classic form, like the Harbor example. Synergies usually decide it.
- Merger of equals
- Two similar-sized companies combine. Cost synergies and integration risk matter most.
- Private equity buyout
- A financial buyer with no synergies, focused on returns. See the private equity due diligence lesson.
- Buying to enter a market
- An acquisition as the way into a new market. Pair this framework with the market entry framework.
- Selling a business
- The client is the seller. Compare what the unit is worth to the client with what buyers would pay for it.
Part 8 of 9
Practice what you learned
Reading a framework is not the same as using it under time pressure. Put this lesson to work:
Try a full case
More ways to practice
Part 9 of 9
Frequently asked questions
What is the M&A framework in a case interview?
It covers four areas: the target's market, the target company itself, the synergies from combining the two, and the price and risks of the deal. A deal creates value when the target's standalone value plus synergies is more than the price plus integration costs.
How do you structure an M&A case?
Clarify why the buyer wants the deal, assess the target's market and the target itself, estimate cost and revenue synergies and integration costs, then compare total value to the price and recommend a walk-away number.
What are synergies in M&A?
Synergies are the extra value created by combining two companies. Cost synergies come from savings like shared facilities or better purchasing. Revenue synergies come from extra sales, like selling one company's products through the other's channels.
How do you value a company in a case interview?
Usually with a multiple. Take the company's annual profit, often EBITDA, and multiply it by what similar companies sell for. Full discounted cash flow models are rarely needed in a case interview.
How is an M&A case different from a private equity case?
A corporate buyer can combine the target with its existing business and capture synergies. A private equity buyer usually cannot, so it focuses on growing the company on its own and earning a return when it sells.
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