Finance Deal Analysis Drill
This conversation was generated using Cook'd AI's career assistant and reviewed by Fallon Han from our editorial team for accuracy.
Quizzing me like a live technical round sounds right. I have a real shot at a boutique M and A advisory shop in Singapore, and my student visa is expiring, so I need to be sharp on merger consequences. Use a recent deal and press me on post merger impact, accretion and dilution, and accounting nuances with short answers only.
Got it. I will keep this like a real first round. Use Microsoft acquiring Activision Blizzard as the reference deal. First question: walk me through the main merger consequence, from both strategic and financial angles, in one minute or less.
Strategically, Microsoft wanted gaming scale, content, and distribution. Financially, the deal should add revenue and long term cash flow, but near term it can hurt earnings because of purchase accounting, amortization, and integration costs. It also changes leverage and capital allocation.
Good. Next, tell me whether this kind of deal is more likely accretive or dilutive in year one, and name the main drivers. Short answer only.
Likely dilutive in year one if the target has lower earnings or if amortization and financing costs are large. It becomes accretive if the target contribution to net income, synergies, or low cost financing outweighs those costs.
Better. Now a tougher one: what gets written up or stepped up in purchase accounting, and what usually happens to goodwill versus identifiable intangibles after close?
The target assets and liabilities are remeasured to fair value. Identifiable intangibles like customer relationships or developed technology are recognized separately and amortized. Goodwill is the residual amount after fair value adjustments and is not amortized, but tested for impairment.
Good. Final pressure test: if the target has a lot of deferred revenue and stock based comp, what accounting issues can distort the first post deal numbers?
Deferred revenue can be written down to fair value, so future revenue recognition may look suppressed even if the business is fine. Stock based comp can affect operating expenses and should be normalized carefully. Also, one time acquisition accounting adjustments can make year one earnings look weaker than the underlying economics.
Strong overall. Your answers are concise and technically on point. To sound sharper for a boutique M and A shop, tighten the language on accretion math and always mention purchase accounting, amortization, and impairment in that order. You handled the pressure well.