Investment Banking interview preparation
Every question below is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it. Answers are written the way you would actually say them out loud — answer first, then the mechanism, then the limitation.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 100
- Firms
- 46
- Updated
- September 2026
036Walk me through a merger model.Morgan StanleyInvestment Banking · Hong Kong · 2025Morgan StanleyInvestment Banking · New York · 2026
Say this
Set the purchase price and the mix of cash, debt and stock. Combine the two income statements, layer in synergies and the financing effects, then compare the new pro forma EPS against what the acquirer would have earned alone.
Then walk it
- Start with the offer price per share and the premium to the unaffected price. That gives you total consideration and the funding need.
- Choose the funding mix. Cash costs you forgone interest, new debt costs interest, new stock costs share count. Each has a different EPS effect.
- Add the two income statements together, then adjust: add synergies, subtract new interest expense, subtract forgone interest on cash used, and add incremental D&A from any asset write-up.
- Tax the adjustments at the marginal rate, then divide by the new share count including shares issued to the target.
- Compare pro forma EPS to standalone EPS. Higher is accretive, lower is dilutive. Then find the breakeven, usually the maximum price or the minimum synergies that keep it neutral.
- The output the client actually wants is the accretion-dilution sensitivity grid across price and synergy assumptions, plus the credit impact on pro forma leverage.
Where candidates lose it
Forgetting the forgone interest on cash. Cash is not free: using it costs you the interest you were earning. Candidates also skip the incremental D&A from purchase accounting, which quietly makes a deal look better than it is.
Expect next
- Is this deal accretive or dilutive, and by how much?
- What is the rule of thumb for accretion using P/E?
- How does an asset sale differ from a stock sale here?
Reported by candidates at Morgan Stanley (Investment Banking, Hong Kong, 2025); Morgan Stanley (Investment Banking, New York, 2026). Source: Wall Street Oasis.
037Is the deal accretive or dilutive to the acquirer's EPS, and by how much?MizuhoInvestment Banking · San Francisco · 2026Bank of AmericaConsumer and Retail · London · 2026
Say this
The quick test is to compare the cost of the funding with the yield you are buying. If the target's earnings yield, the inverse of its P/E, exceeds the after-tax cost of the capital you use, the deal is accretive.
Then walk it
- For an all-stock deal the rule is simple: if the acquirer's P/E is higher than the target's, it is accretive. You are issuing expensive paper to buy cheap earnings.
- For cash, compare the target's earnings yield to the after-tax interest forgone on the cash. Cash earning 3 percent pre-tax, so about 2.25 percent after tax, against a target at 20 times P/E which is a 5 percent yield, is accretive.
- For debt, compare the target's earnings yield to the after-tax cost of the new debt. Debt at 7 percent pre-tax is 5.25 percent after tax, so a 5 percent yield target would be slightly dilutive on that funding alone.
- To quantify it, build the pro forma: combined net income including synergies and financing costs, divided by the new share count, against standalone EPS.
- Then the point that matters: accretion is not the same as value creation. You can buy a low-multiple, declining business, show accretion, and destroy value. The real test is whether the price is below the intrinsic value plus achievable synergies.
Where candidates lose it
Treating accretion as proof the deal is good. It is an EPS arithmetic result, not a value judgement. Saying so unprompted is exactly what the Bank of America version of this question was reaching for.
Expect next
- What drives the result, and how would you assess whether the deal creates value?
- So can an accretive deal destroy value?
- Where would the breakeven price be?
Reported by candidates at Mizuho (Investment Banking, San Francisco, 2026); Bank of America (Consumer and Retail, London, 2026). Source: Wall Street Oasis.
038What is the difference between an asset sale and a stock sale?Morgan StanleyInvestment Banking · Hong Kong · 2025
Say this
In an asset sale the buyer picks the assets and liabilities it wants and gets a stepped-up tax basis it can depreciate. In a stock sale the buyer takes the whole legal entity, warts and all, with the historical tax basis carried over.
Then walk it
- Buyers prefer asset sales. You leave behind unwanted liabilities, including litigation and environmental exposure, and you get to write up the assets and depreciate them, which is a real cash tax benefit.
- Sellers prefer stock sales. One level of tax at capital gains rates, a clean exit, and no lingering obligations. In an asset sale a corporate seller can be taxed twice, at the entity and again on distribution.
- Asset sales are administratively painful. Every contract, licence and employee has to be assigned or novated, and some consents cannot be obtained.
- So price usually bridges the gap. A buyer will pay more for an asset deal because the tax step-up is worth something, and that premium is negotiated.
- The middle ground is a 338(h)(10) election in the US, where a stock sale is treated as an asset sale for tax purposes. That gets the buyer the step-up without unwinding every contract.
Where candidates lose it
Getting the preference backwards, or not knowing why the buyer cares. The step-up in basis is the whole economic point. If you cannot explain that the write-up creates future depreciation and therefore a cash tax shield, you have only memorised labels.
Expect next
- How do you quantify the value of the step-up?
- What is a 338(h)(10) election?
- How does purchase accounting change your merger model?
Reported by candidates at Morgan Stanley (Investment Banking, Hong Kong, 2025). Source: Wall Street Oasis.
041Who is typically willing to pay more for an acquisition, a financial sponsor or a strategic buyer?Houlihan LokeyMergers and Acquisitions · Los Angeles · 2026
Say this
A strategic, normally, because it can capture synergies and does not need a fixed return on equity. A sponsor is constrained by its return hurdle and the debt markets, so it is valuing standalone cash flows only.
Then walk it
- The strategic gets cost synergies, revenue synergies and sometimes a strategic premium for defending a market position. All of that expands the price it can justify.
- It also has a lower cost of capital and no fund life, so it can accept a longer payback.
- The sponsor has to hit roughly a 20 to 25 percent IRR in five years with debt it can actually raise. That caps the entry multiple mechanically.
- Where sponsors win anyway: a platform sponsor with an existing portfolio company in the sector effectively has synergies too, through a bolt-on. In that case the gap closes or reverses.
- And in a cheap credit market with high multiples, sponsors have repeatedly outbid strategics, because the leverage available made the maths work. So the rule holds on average and breaks often.
Where candidates lose it
Stating the rule with no mechanism and no exception. The interviewer wants the return-hurdle constraint named explicitly, and the bolt-on case is the answer that shows you follow live deals.
Expect next
- When does the sponsor win?
- What return does a sponsor actually need?
- How does the credit market change your answer?
Reported by candidates at Houlihan Lokey (Mergers and Acquisitions, Los Angeles, 2026). Source: Wall Street Oasis.
044If you were the buyer, what would you consider before doing this acquisition?EvercoreInvestment Banking · Menlo Park · 2025
Say this
Four things in order: is the target worth what I am paying on a standalone basis, what synergies are genuinely achievable, can I fund it without breaking my own credit profile, and can I actually integrate it.
Then walk it
- Standalone value first. Run the DCF and comps on the target alone, ignoring any synergy, so you know what you are paying for the business as it is.
- Then synergies, split into cost and revenue, with a probability attached. Cost synergies are largely deliverable; revenue synergies are usually aspirational and I would haircut them heavily.
- Then funding and credit. What does pro forma leverage look like, does it breach covenants, does it cost the acquirer its rating? A deal that triggers a downgrade can be value-destructive even if it is accretive.
- Then integration and diligence risk: customer concentration, key-person dependency, systems compatibility, culture, and anything in the quality-of-earnings work that suggests the EBITDA is not real.
- And the deal-breaker screen: antitrust, foreign investment review, and change-of-control clauses in the target's major contracts. Those are the things that kill deals after you have paid the fees.
Where candidates lose it
Producing an unstructured list of worries. Structure is the point. Standalone value, then synergies, then financing, then integration, then closing risk. Give the frame first, then populate it.
Expect next
- Which synergies would you actually put in the model?
- How would you diligence the quality of earnings?
- What would make you walk away?
Reported by candidates at Evercore (Investment Banking, Menlo Park, 2025). Source: Wall Street Oasis.
Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.