Event Driven / M&A Arb Interview Process - How to Prepare?
I am currently interviewing with a large hedge fund platform for an event driven role (non US market).
The team seeks an experienced professional (eg. 5+ years), and the role is expected to be nearly 100% M&A arb focused. My background is in banking and PE, with a special sits angle.
I’ve been following a number of relevant M&A arb deals in the past few years, and I’ve successfully invested (PA) in a number of corporate structure types, in multiple geographies, involving events, usually without a hard catalyst, but many of those became actual M&A deals.
My question is how to prepare for second and third round interviews? Also, another challenge is that this particular team only focuses on events and is avoiding fundamentals oriented investing and analysis.
- I am preparing a “pitch” for a very recent post-spin type value oriented situation, although it’s not M&A arb (so the team can’t / won’t invest in this), but it’s still an “event trade” in the local market, very topical, and I can go into detail.
- I’ve prepared a recent topical M&A arb case study, it was intended to be a pitch for the first round interview but the spread disappeared within 1-2 days after initial announcement, as it went definitive very quickly. But I can talk about this and what I thought pre definitive.
- I’ve been following announced deals every week, but this is a non-US location with much fewer deals, and the spread for M&A arb opportunities tends to disappear too quickly to be used as a pitch.
- It seems that I am missing something that is deeply technical and focused only on the nature of the event itself. Not sure how to find such a situation though.
- Any other thoughts about how to prepare would be appreciated.
Based on the WSO content and threads related to event-driven strategies and M&A arbitrage, here are several preparation strategies for your upcoming interviews:
Deep Dive into Event-Driven Strategies: Given your background in banking, PE, and special situations, leverage your experience but focus on refining your understanding of event-driven strategies, particularly M&A arbitrage. This involves understanding the nuances of deal structures, regulatory environments, and market reactions to deal announcements.
Technical Preparation: Since the role is nearly 100% M&A arb focused and avoids fundamentals-oriented investing, concentrate on technical aspects such as deal structure analysis, risk arbitrage, and scenario analysis. Be prepared to discuss how you evaluate the probability of deal closure, deal timelines, and how you would hedge positions.
Case Studies and Pitch Preparation: Your idea of preparing a pitch for a recent post-spin type value-oriented situation is good, but ensure you also have a strong M&A arb case study. Even if the spread disappeared quickly in your example, discussing your thought process pre-definitive announcement can showcase your analytical skills and how you assess risk/reward in fast-moving situations.
Stay Informed on Current and Past Deals: Continue following announced deals weekly. For the interview, prepare to discuss not just the deals themselves but also the broader market implications and how similar future events could be leveraged. Even if deals in the non-US location are fewer and spreads disappear quickly, your ability to analyze and discuss these situations will be valuable.
Technical Skills: Ensure your Excel and financial modeling skills are sharp, focusing on models relevant to event-driven investing and M&A arbitrage. Be ready to discuss how you've used these skills in your past roles and how they apply to analyzing event-driven opportunities.
Behavioral and Fit Questions: Prepare for behavioral questions that might explore your ability to work in a team focused solely on event-driven strategies. Highlight experiences where you've successfully navigated similar environments or dealt with high-pressure, fast-paced decision-making.
Research the Fund and Team: Understand the fund's past investments, strategy, and philosophy towards event-driven investing. Tailor your pitch and case studies to align with their approach, and be prepared to discuss why you're a good fit for their specific strategy and team dynamics.
Network: If possible, reach out to current or former employees of the hedge fund or similar roles in other organizations. Gaining insights into the specific challenges and expectations of the role can provide you with a competitive edge.
Remember, demonstrating a deep understanding of event-driven strategies, coupled with your ability to analyze and act on fast-moving M&A opportunities, will be key to succeeding in your interviews.
Sources: https://www.wallstreetoasis.com/forum/investment-banking/sa-interview-prep-techniques?customgpt=1, I work in event driven / arbitrage. Here are some career advice for you, Q&A: 3rd Year PE Associate ($10bn+ AUM, MBO/LBO, equity, mezz, distressed debt), https://www.wallstreetoasis.com/forum/investment-banking/non-target-to-bb-ib-sa?customgpt=1, Beginner Interview Prep Tips
Guessing that there are not many M&A arb seats?
What's the catalyst angle of the post-spin? If you're aware they don't like fundamentals, it sounds like they'll focus on that element of the pitch. For spin-offs, I remember one deal where the initial listing was too small so the float was too small for long-only's to invest. This was going to be addressed after the lock-up period expired, presenting a hard catalyst date.
Remainco is a mid-cap that has undergone a multi-year process of selling non-core businesses and non-core real estate. Recently it completed a spin-out of a cash burning sub, which marked the completion of the simplification exercise.
Free float of remainco is sub 20%, and the company is owned by two large shareholders, the (>50%) major shareholder is very large entity operating in the same industry, seeking int’l growth and diversification, the second large (~30%) shareholder is a legacy real estate focused group, which has been selling down its share in remainco over the last decade.
Catalyst is scenario A, the company’s valuation discount (vs int’l peers and its major shareholder) is reduced as a result of better fundamentals (roic, growth, etc) resulting from the simplification, which should become apparent in the next 12 months, and scenario B, the major shareholder is planning a secondary listing on the same exchange as remainco, and is likely to acquire remainco to clean up its corporate structure.
My argument is that the listed status of remainco is a distraction, and the major shareholder should not pursue a second listing without first acquiring the 15% float of remainco, which trades at a much lower multiple.
Upside is a circa 2.0x return, if I am right about catalyst B, and I would argue that the worst case is scenario A, which is a 1.3x return.
… seems sufficiently catalyst heavy, but it’s not like a complex cross border M&A arb situation with a big spread, and some elongated process, which might be ideal.
in what world is x-border complex reg review ideal? the labor + cost that goes into developing an informed view is insane, and it's still guess work on binary risk at the end of the day. your spinco thesis sounds interesting and shows you're thinking in the right areas (but i'm VERY skeptical of any idea presented as having no downside so flesh that out / think of why it coudl go lower...)
also know your audience. you think you're gonna have an edge talking to arb guys about why HES/CVX or US Steel is gonna close/break? be humble. if you're looking at those, would choose lower octane stuff tbh, or a wide-spread name where the ultimate q is actually straightforward (like market definition in CPRI/TPR --> you still won't have any edge, even tho returns are quite juicy)
interesting read thanks for sharing
When you say the "spread disappears" after a few days, this is sometimes because there is perceived optionality in a merger situation (i.e. price bump, counterbids), which has been topical in Europe and the UK in the last 6 months or so.
There are still some European situations with a healthy (ish) spread that you can pitch: Kindred / La Francaise Des Jeux (FDJ), Redwood / Barratt
What spread would be too low? Sub 10% IRR?
Completely depends on the fund. Some guys try for 1-2% over fed funds and investors are happy with that and want to lose money 1 in 20 years. Others want 10% over with more risk. These are also the guys that blow up on unsigned/rumors (CYTK and PARA might be recent instances here) and trying to play big reg risk deals with enormous downside (IRBT and CPRI recently)
I think you have done enough work to show you are competent and serious about prepping for the interviews.
Turn things around and ask them how they navigate the lack of deals and the quickly closing spreads. You will learn something new and it will show them you've done your homework.
Sapiente autem repellendus et reprehenderit ullam non voluptatem quia. Vel deleniti id magni eaque. Sunt incidunt est voluptatum dolor sunt soluta. Quis eos molestiae vitae accusamus veniam quisquam amet.
Aut ut voluptatibus nam cupiditate facere eum reprehenderit excepturi. Sint aliquam et ut officia. Tempora facere sunt voluptatem optio aut.
Dolores exercitationem quia dolorem provident est earum veniam. Quam mollitia ipsum sed sint.
Minus repellendus ipsam dolores quibusdam eveniet. Minima quisquam ea est nulla. Sed enim velit aliquid sed. Occaecati aliquam non mollitia eius dolorum. Rem illo ducimus et officia et debitis placeat.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...