Greenhill IB Interview Questions

The angle is 7.5°. At 3:15 the minute hand points straight at the 3. The hour hand has moved a quarter of the way from the 3 toward the 4. Hour marks sit 30° apart, and a quarter of that gap is 7.5°.

Buffett prefers EBIT because depreciation and amortization stand for assets the business is using up, and future capital expenditure has to pay for that. EBIT charges the period for it. EBITDA adds it back. His line in the 2000 Berkshire letter is the whole argument: "Does management think the tooth fairy pays for capital expenditures?" I agree with the economics, especially in capital-intensive businesses where maintenance capex runs close to depreciation. I still would not throw EBITDA out. It is a useful way to compare operators with different capital structures, tax positions and depreciation policies, and it is the market's standard denominator for leverage.

A Coke-Pepsi deal would produce mostly cost synergies. The savings come from cutting duplicate corporate overhead, merging bottling plants, buying ingredients and packaging in bigger volumes, combining distribution routes, and pooling marketing spend. The plant and route savings depend partly on Coke's franchised bottlers. There would be some revenue synergies too, like selling Pepsi's Frito-Lay snacks through Coke's channels. The big catch is antitrust. The two companies control a very large share of soft drinks, so regulators would likely challenge the deal or demand that the combined company sell major brands.

Pick a real deal where Greenhill was one of the advisors and present it in three slots. Details: the acquirer and target, the deal size and premium, the valuation multiple, and whether the buyer paid in cash or stock. Hook: one line on why you find it interesting, tied to a trend or company you follow. Rationale: the strategic logic (synergies, defensive moves) and the financial logic (accretion, tax, use of cash).

EV stays at $5bn. The company has $2bn more debt, but it also holds $2bn more cash, so net debt and EV don't change. WACC will most likely fall. After-tax debt costs less than equity, and, assuming little existing debt, $2bn of debt on a $5bn business is moderate leverage.

I'd look at three deal numbers. First, whether the merger is accretive or dilutive: does it raise or lower American's earnings per share? Second, whether the synergies (cost savings and extra revenue from combining) are worth more than the premium paid over JetBlue's share price. Third, what the deal does to combined leverage, meaning debt and aircraft leases relative to EBITDAR. EBITDAR is operating profit before interest, taxes, depreciation, amortization and aircraft rent. Because it's an airline deal, I'd also compare the two carriers on unit economics, such as revenue and cost per available seat mile (one seat flown one mile), and measure route overlap, which drives both the synergies and the antitrust risk.

A sources and uses table shows where the money for a leveraged buyout (LBO, a purchase paid for largely with borrowed money) comes from and where it goes. Total sources must equal total uses. Sources are the new debt, split into tranches (layers of debt with different terms, such as a term loan and senior notes), any rollover equity (stock that existing owners or management put back into the deal instead of taking cash), sometimes excess cash already on the target's balance sheet, and the sponsor equity (the private equity firm's own cash check). The sponsor equity is typically the plug that makes the two sides balance. Uses are the purchase price for the target's equity, repayment of the target's existing debt (called refinancing), and the transaction and financing fees.

Before recommending anything, I would gather five things: the client's financial profile (income, assets, debts, current holdings), their objectives and time horizon (what the money is for and when they need it), their risk tolerance (how much loss they are willing to sit through), their risk capacity (how much loss they can afford without derailing their goals), and qualitative constraints such as liquidity needs, taxes, legal restrictions and personal preferences. Together these form an Investment Policy Statement, the written plan that sets the client's asset allocation (the split between stocks, bonds, cash and other assets). The return target follows from these inputs, so it gets set after them.

Common errors include mixing equity value and enterprise value across methodologies, using inconsistent share counts or bridge assumptions, including outlier comps, double-counting control premiums, misaligned axes, stale inputs, and unexplained ordering differences such as precedents screening below trading comps.

Subordination can be set up four ways. Structurally, by placing debt at a holding company (HoldCo) above the operating company (OpCo) that owns the assets. Contractually, through a clause in which a lender agrees to be repaid after named senior debt. Through lien priority, where first-lien lenders are paid from their collateral before second-lien or unsecured lenders. And through a payment waterfall that sets the order in which cash is distributed among lenders. Subordination means one creditor's claim is repaid after another's, and it matters most in a default or bankruptcy.

A strong answer is the DCF (discounted cash flow). It values a company on the cash it is expected to generate, and every key assumption (growth, margins, reinvestment, discount rate) sits in the open, where you can test and debate each one. A DCF is very sensitive to those assumptions, so you sanity-check it against market-based methods such as comparable companies and precedent transactions instead of relying on it alone.

Name one specific acquirer and one specific target from an industry you have studied. Defend the pairing on four points: strategic fit, synergies (the extra profit the combined company earns that the two firms could not earn alone), whether the buyer can afford the deal, and whether it adds to or reduces the buyer's earnings per share (accretion or dilution). Keep two or three backup buyers or targets ready. Say why each one is weaker or stronger than your first choice.