BMO IB Interview Questions

I would triangulate three methodologies: a DCF analysis for intrinsic value based on projected free cash flows, comparable companies analysis for current market-relative value, and precedent transactions analysis for M&A-contextualized value including control premiums.

Company B's former shareholders own 0% of the combined company, because Company B's equity value is zero, so its shareholders contribute nothing and receive no ownership stake in the merged entity.

Levered Beta = Unlevered Beta × [1 + (D/E) × (1 – Tax Rate)], which re-levers an asset beta to reflect the additional equity risk introduced by the company's financial leverage, assuming a debt beta of zero.

Grossing up the $500mm payment to a $625mm implied equity value, then adding $100mm debt and subtracting $50mm excess cash gives an EV of $675mm, yielding an EV/EBITDA multiple of 6.75x and an EV/Revenue multiple of 2.25x.

You would include a situation overview and strategic rationale, full valuation analysis with premium analysis, accretion/dilution and pro forma merger consequences, sources and uses with financing structure, and process/execution considerations including regulatory and shareholder vote dynamics.

You need the purchase price (initial cash outflow at t=0); with it, you set NPV to zero and solve the resulting cubic equation for r using trial-and-error interpolation, Newton-Raphson iteration, or a financial calculator.

A buy-side acquisition pitchbook follows the arc: situation overview, acquisition rationale and criteria, target screening and shortlist, valuation (comps, precedents, DCF), synergies and accretion/dilution, sources & uses, transaction structure, timeline, risk factors, and appendix.

The deal is accretive because Company B's earnings yield of 10% exceeds the blended weighted-average financing cost of approximately 3.79%, meaning the acquired earnings more than cover the cost of the stock, debt, and cash used.

Companies enter a JV to share risk and capital, combine complementary capabilities, access new markets (especially where regulations require local partners), accelerate time to market, and preserve optionality—all without the full cost, integration risk, and regulatory burden of an outright acquisition.

A company buys another when owning it is worth more than the price. That gap has a few sources: cost and revenue synergies, getting a capability or market position faster than it could be built, a stronger competitive position, and sometimes tax attributes. Synergies are the extra value the two businesses make together that neither makes alone. Cost synergies strip out duplicated overhead and facilities. Revenue synergies sell more by combining products, channels or customers. Growth in reported earnings per share, a bigger balance sheet and diversification are not reasons on their own. The buyer pays a control premium over the target's standalone value, and the combination has to produce more than that premium before shareholders are better off.