Merger Case Walkthrough For Interviews
This conversation was generated using Cook'd AI's career assistant and reviewed by Fallon Han from our editorial team for accuracy.
I am a third-year finance major in the US on an F-1 visa, and I am targeting a bulge-bracket investment banking summer analyst role. I want to understand a merger case from start to finish, not just do one calculation. Can we walk through why two companies would do the deal in the first place?
Yes. Start with strategic rationale before touching the math. A merger usually makes sense if the buyer can become stronger in one of three ways: expand market share, enter a new product or geography, or gain capabilities faster than building them internally. In an investment banking interview, you want to say the buyer asks, 'What do we get that we cannot easily build on our own?' For example, a bank may buy a fintech company to speed up digital offerings. The key is that the logic has to work at the business level first, because synergies and valuation only matter if the combination creates a real strategic fit.
So if the strategy is the first layer, how do I think about synergies without sounding vague? I know people say revenue synergies and cost synergies, but what should I actually look for in a merger case?
Think of synergies as the bridge between strategy and valuation. Cost synergies are usually easier to underwrite because they come from eliminating duplicate functions, overlapping branches, or redundant systems. Revenue synergies are more uncertain, but they can come from cross-selling, better pricing power, or a larger distribution network. In a merger case, the important step is to translate those ideas into timing and probability. For instance, if the model assumes 100 million of annual cost savings phased in over two years, ask where exactly those savings come from and whether there are one-time integration costs. That matters because synergies increase the value of the deal, but only if the present value of those benefits exceeds the costs to achieve them.
That makes sense. But once I have synergies, how does that feed into accretion or dilution? I always get lost when the deal shifts from strategic logic to EPS impact.
Accretion or dilution is the shareholder-level test. It asks whether the buyer's earnings per share go up or down after the deal closes. To get there, the model combines the target's earnings, financing costs, purchase accounting adjustments, and synergies, then divides by the pro forma share count. If the deal is financed with cash, debt, or stock, each source affects EPS differently. Debt raises interest expense, stock increases share count, and cash reduces interest income. So the same strategic deal can be accretive or dilutive depending on how it is funded. That is why bankers connect the operating logic to the capital structure: a strong strategic deal can still be dilutive if the financing is expensive or the target has weak earnings.
Can you tie those pieces together in a simple way? Like, if I am asked in an interview to explain the merger case from start to finish, what is the clean framework I should use?
Use a three-step framework. First, explain why the deal happens strategically, meaning what problem the buyer solves or what opportunity it captures. Second, show how value is created through synergies, and be specific about where they come from, when they show up, and what they cost to realize. Third, test whether that value reaches shareholders through accretion or dilution, which depends on purchase price, financing mix, synergy timing, and the target's earnings base. A strong answer sounds like: 'The buyer wants the target for strategic expansion, expects identifiable cost and maybe revenue synergies, and then evaluates whether those benefits outweigh financing and integration effects on EPS.' That keeps the story coherent from rationale to financial impact.
If the deal is slightly dilutive at first but clearly strategic, how should I talk about that as a candidate for banking summer analyst interviews?
That is a very good interview angle. You should say that initial dilution does not automatically make a deal bad, especially if the strategic rationale is strong and the synergies are credible. In banking, many deals are justified by long-term value creation rather than immediate EPS uplift. The right way to frame it is: 'The buyer may accept short-term dilution if the acquisition strengthens its competitive position, unlocks synergies, or creates a platform for future growth.' Then add one caution: the board will still care about the size and timing of dilution, because it affects investor reaction and execution risk. So you are showing that you understand both the strategic and the financial lenses.