Got a superday coming up for M&A. I always get asked “is there anything going on in the world right now that you think can impact markets?” or something along those lines. I’m never happy with my answer and they always sound super basic. Y’all got any ideas of what I could talk about that is more unique but not insane?
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Eventual tapering- can cut down the value of companies whose values rely heavily on future earning potential like high growth tech companies, as interest rates tick up you have to factor that into the cost of capital which will lower the valuation of said companies. I think this is one of many solid answers that shows a strong understanding of what is going on and the effects they might have. There are tons of ways to go about this question
IMO this is just a “check the box” question. As long as it is a current event (ie inflation, OPEC deal, what above said, etc.) and you add some substance to it you will be fine.
Example- if a few weeks ago you were to mention how OPEC wasn’t able to come to terms on new production levels. This decision will cause issues in xyz because of xyz. Then you are probably fine.
Just shows you are up to date and can form an opinion. I never liked these either haha, but I found I was over complicating it. Only thing I will add is if you bring up something like rates, be able to talk about why they raise/lower rates and the overall impact it has on the economy.
If you're interviewing for M&A, I'd be less concerned about the markets and more concerned about a deal that the bank you're interviewing at recently did...common misconception that M&A bankers work with the market a lot. Yes, obviously the market has an influence on M&A activity, but that's more for traders, cap markets, etc. professionals. Focus on a recent deal that they did and be prepared to answer why it's interesting to you (strategic rationale of the deal)...also a larger deal that's going on in the market right now can't hurt
I get what you are saying but the question I got last week for M&A pertained more to the economy. I feel like talking about one of their deals might be a stretch. Unless you think otherwise.
Agreed, I was asked a market specific question when interviewing with an M&A group. With that being said, I'd definitely have answers prepared for either question (about company deals and/or current market outlook)
This is literally a question to see if you spend your time actually awake or on TikTok all day long. If you can say ANYTHING AT ALL like policy changes, budget deals, international headlines (Afghanistan, Iran vs. Israel rhetoric, etc), Fed policy, anything with commodities or inflation. Literally anything. Do you do pay attention to anything at all. in the universe. ever.
I would talk about inflation and then link it to tapering and the fed raising rates. Changes in the 10 year treasury yield have very important valuation implications. Essentially every risk asset is priced off of the 10-year treasury. CAPM calculates cost of equity by essentially adding a risk premium over 10 yr. Corporate debt is also priced as a spread over treasury yield (a bit more nuanced though given you discount each coupon as if it was a zero coupon bond and use corresponding treasury spot rate). Higher nominal yield would significantly impact the valuation of companies whose cash flows are long dated (essentially any tech company or company where terminal value represents entire valuation). In a risk-off environment, corporate spreads tend to widen as well. Spreads are currently at historic lows, especially for low rated issuances. A lot of M&A activity is financed with low rated bonds, so increase in spreads would increase cost if financing and the issuance might be a bit harder to place.
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