Walk Me Through the Sell-Side M&A Process (Interview Question)

Hello Monkeys,

Current first-year analyst here, trying to lateral. I recently had a superday the other day at a regional M&A shop I believe I might have got this question wrong. My background is in ECM, so I don't have any M&A experience and I was asked this question in an interview. This was my answer and I wanted to get your take on it, and please include anything I might have missed. This will be helpful in future interviews.

My answer was as follows (with explanations, but this is omitted to save some time):

  1. Bake-Off
  2. Signing the Engagement Letter
  3. Development of a Contact Prospect List
  4. Development of Marketing Materials, CIM,, Financial Models, Teaser
  5. Sign NDAs with potential buyers
  6. Send the CIM
  7. Initial Bid Procedures Letters
  8. Creation of a data room
  9. Buyers submit IOIs
  10. Management Presentations
  11. Evaluate Initial Bids
  12. Signing a Term Sheet
  13. Final Bid Procedures Letters and Final Bid Placement
  14. Select the winner of the bid
  15. Signing Definitive Agreements
  16. Fairness Opinion
  17. Closing

Please feel free to provide feedback if I missed anything. Its much appreciated.

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Comments (3)

Jul 21, 2017

Between 4 and 5, you'd send the teaser to the buyer list and then sign NDAs/send out the CIM when a buyer is interested. You'd also be developing the VDR starting at step 3 and working on it all the way to 10 (and beyond for additional DD requests).

Best Response
Jul 21, 2017

You're getting too detailed and including too many steps. You're also creating a new problem: since your answer is so detailed and reads more like a grocery list than an answer, the interviewer will now focus entirely on whether or not you missed a step, as opposed to holistically evaluating your response. I would with the following broad steps:

  1. Winning the mandate - This phase includes creating the pitch, the actual pitch, the signing of the engagement letter, and any preliminary calls with management to learn more about the company.
  2. Marketing - This phase includes receiving initial documents from management, setting up a data room, creating the marketing materials (teaser and CIM), and sending out the teaser together with the NDA. If the potential buyer signs the NDA, you send them the CIM. You will also set up your valuation model at this point.
  3. IOI - The potential buyers may come back to you with follow-up questions and request a call, possibly with management. The amount of information apart from the CIM given to potential buyers is usually very limited at this stage. Potential buyers will then submit their IOIs.
  4. LOI - This step usually starts with selecting a select few potential buyers who submitted an IOI to attend management presentations. There may be site visits involved here too. At this point, you will have set up a formal data room that is being populated with a base level of information. Almost all potential buyers will have specific follow-up requests and might even request additional calls with management. Potential buyers now submit an LOI.

5 Final due diligence and closing - You now select one potential buyer with whom to move into exclusivity. This potential buyer will send you a detailed due diligence list to be answered. Third party advisers usually get involved at this point to run their own diligence process (e.g. quality of earnings, environmental assessments, benefits analysis, insurance analysis, etc.). One party will start drafting a purchase agreement, and then your client's counsel and the potential buyer's counsel will trade edits. You then finalize the diligence process and sign the purchase agreement.

I have obviously missed some details, but that's not the point of this interview question. The interviewer sees your lack of M&A experience and is trying to determine whether or not you are serious about moving into M&A and have done the appropriate research. I am happy to go into more detail if you're curious about any step.

    • 14
Jul 21, 2017