Goldman Sachs IB Interview Questions

In an all-stock deal, a lower P/E acquirer buying a higher P/E target is dilutive because each share issued carries more earnings than the target's earnings received; however, sufficient synergies, switching to cash consideration, or rapid target earnings growth can flip the result to accretive.

Equity is a call option on the firm's assets; as long as bankruptcy proceedings are ongoing (time value > 0) and asset values are uncertain (volatility > 0), the option retains value, supplemented by negotiation leverage and speculative demand.

The discount rate accounts for the time value of money, a risk premium for the uncertainty of each coin flip, and the opportunity cost of deploying capital here instead of the next-best alternative investment.

I follow U.S. healthcare services, where GLP-1 adoption is driving pharma M&A for manufacturing capacity (Novo/Catalent ~$16.5B), Medicaid redeterminations are pressuring safety-net providers toward restructuring, and FTC scrutiny on PE roll-ups is shifting sponsor exits toward continuation vehicles.

A company goes public to raise growth capital, provide liquidity for existing shareholders, create a publicly traded acquisition currency, establish a transparent market valuation, lower its cost of capital, and attract talent with liquid equity compensation.

I'd walk through five connected layers—growth, inflation, Fed policy, credit conditions, and deal activity—showing how sticky above-target inflation keeps rates elevated, widens spreads, raises cost of capital, compresses valuations, and ultimately constrains M&A and LBO volume.

Walk through a deal using six parts: situation/context, deal structure and premium, valuation multiples versus comps, strategic rationale including synergies and accretion/dilution, financing and key terms, and your opinion backed by at least one specific number.

Project unlevered free cash flows, discount them and a terminal value back to the present using WACC to get enterprise value, then subtract net debt and divide by diluted shares to find implied share price.

A convertible bond combines straight debt and an embedded equity conversion option. Conceptually, you can think of it as bond value plus option value, but in practice I would value it with a binomial or trinomial lattice that jointly models stock-price evolution, credit risk, conversion behavior, and any call/put features. As a cross-check, I would also look at the straight-bond value and the conversion value to understand the bond floor and parity.

Increasing AP days from 60 to 90 reduces net working capital, creating a one-time boost to free cash flow in the transition year, which increases the present value of cash flows and raises your DCF valuation.

In 2018, anchoring to the ~2.9% 10-Year Treasury plus a ~3–4% risk premium gives a ~6–7% national cap rate; compressing 150–200 bps for NYC yields an approximate cap rate of 4–5%.

Price/Book equals P/E multiplied by ROE, since P/B = (P/EPS) × (EPS/B), where EPS cancels; this means a high P/B implies either a high earnings multiple, high return on equity, or both.