Case interview sample question and answer tips – Mergers & Acquisitions

Case interview sample question and answerOur article on how to prepare for case interviews got a very positive response. So we thought it would be helpful to have a follow-up post covering case interview sample questions with answer tips.

Instead of creating one in-house, we invited Marc Cosentino, the world’s foremost authority on case interviewing, to write a sample case interview question exclusively for MBA Crystal Ball readers.

Marc has twenty seven years of experience with case questions, has written over a 100 cases and trained over 150,000 students and alumni. His authoritative book ‘Case in Point’ was called the MBA Bible by the Wall Street Journal.
 


Case interview example with sample questions and answers

How to tackle a Mergers & Acquisitions case

by Marc Cosentino

 
While there are a variety of cases an interviewer can give you, one of the most popular is a merger and acquisition case. A case interview example might be:
 

Interviewer: Our client company G is a high-end maker/manufacturer of luxury goods. It is unable to keep up with demand for alligator-skin products, hand bags, wallets, belts and briefcases. Not only is it having a hard time getting the alligator, it has seen the price of alligator double in the last nine months squeezing otherwise fat margins. The client is considering buying company H, a Louisiana-based company that sources, tans and processes alligator leather. What do they need to take into consideration?

 
The student should first summarize the question, streamline it, not repeat it word for word. The student should also ask a clarifying question or two. One good clarifying question in a M&A case is “Why do they want to buy the company?” Very few students ever ask why.
 

Student: Our client, company G, is considering acquiring company H and we’ve been tasked to determine whether this is a good idea. I have a couple of clarifying questions. Why do they want to buy H?

Interviewer: Why do you think?

 
It’s not uncommon for the interviewer to throw that questions right back at you – so be prepared. Learn some common reasons why one company might buy another.
 

Student: I can think of a number of reasons. Guaranteed uninterrupted source of alligator leather. Reduced alligator costs through lower margins and synergies. Pre-empt the competition from buying H and limiting our source, and maybe to diversify holdings.

 
If you memorize reasons to acquire before-hand you won’t have to stop and think about it and you’ll sound confident and professional. I don’t care who is giving the case, McKinsey, Amazon, Pepsi or Bain they all look for the same four things: structure of thought, confidence level, communication skills and creativity.
 
The most important of the four is structure of thought. Each structure should be crafted to the individual case. Be cautious of books that sell you on the fact that one structure fits all cases. These are often just glorified cookie-cutter approaches that stifle original thought, create pedestrian answers that lack tactical or strategic brilliance, and make it harder to set yourself apart from the competition.
 

Student: I’d like to break this down into a few buckets. Company G, the luxury industry, company H, acquisition costs and risks, and exit strategy.

 
The student should turn their paper toward the interviewer and walk the interviewer through each bucket, touching on the headings first.
 

Company G Luxury industry Company H Acquisition costs & risks
  • Rev & Profits 3 yrs?
  • Product mix?
  • Brand?
  • WCS? (What constitutes success?)
  • Luxury market overall?
  • Competitors?
  • Suppliers?
  • Margins?
  • Competitive response?
  • Rev & Profits 3 yrs?
  • Customers?
  • Suppliers?
  • Margins & volume?
  • Price?
  • Can we afford it?
  • Cultural issues?
  • Supplier to competitors?

 
After explaining your structure, state your initial hypothesis. You can state “My hypothesis is…” or “My thoughts are that G should buy H to control costs and maintain fat margins.”It is important to remember to state a hypothesis.
 

Interviewer: Okay, good. This is what I know about G. (Hands the student a small chart).

 

Company G 2015 2016 2017
Revenues for the last 3 years €900M €918M €935M
Profits for the last 3 years €135M €142M €150M

 

Student: Thanks. (Does some quick calculations) It looks like revenues increased 2%, and its profit margin stayed constant at around 15%. How does that compare to the industry overall?

 
In every case there will be math. The most common math is percentages. You need to be able to do them on the fly – quickly in your head. Consultants like to put things in perspective which is why they always do two things: they quantify related numbers as percentages and ask for trends. If you don’t do those two things automatically, you need to start from this day on.
 
At the end of the case the interviewer will ask you for a recommendation. Lead with the recommendation, state a clear “yes” or “no”. Do not say “I think they…” be definitive. Your M&A recommendation should include; yes or no, why, the risks involved (in order of severity) and the next steps, both for the short-term and long-term.
 

Student:Yes, G should buy H if the price is acceptable. Why? to ensure an uninterrupted flow of alligator and to control costs. The risks are that the bottom falls out of the alligator market or it becomes less fashionable. Some next steps: let H be H and don’t try to integrate the two companies. The cultures are too different. Continue to supply all customers at a small price increase because the margins on alligator is greater than on alligator products.

 
Once you give your recommendation there is a good chance, that regardless of your decision, the interviewer will take the other side of the argument and say “Let me tell you why you are wrong.”

The interviewer is looking for you to defend your answer without getting defensive, make a persuasive argument while keeping your confidence high.
 
About the author: Marc Cosentino is the president of CaseQuestions.com and the former Associate Director of Career Services at Harvard for 18 years. Marc is a graduate of Harvard’s Kennedy School, Harvard’s Program on Negotiation and the University. His firm also works with Fortune 500 companies to help train their Ph.D.s how to think like business people.

This article is part of CrystalConnect, an outreach initiative by MBA Crystal Ball.


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Sameer Kamat
Founder of MBA Crystal Ball. Author of Beyond The MBA Hype & Business Doctors. Here's more about me. Connect with me on Google+ | Twitter | Facebook | Linkedin
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