Qatalyst IB Interview Questions

If the two companies are truly identical in every respect — same growth, margins, risk, capital intensity, and same point in their lifecycle — they should trade at the same terminal EBITDA multiple. The cleanest explanation for a 20x vs. 12x terminal multiple in a DCF is not that the companies are different, but that the valuation setups are different, most commonly the length of the explicit forecast period. A shorter forecast period leaves more future growth to be captured in terminal value, which can justify a higher implied exit multiple; a longer forecast period captures more of that growth explicitly, so the terminal multiple should be lower.

Yes, it's accretive: A's earnings per share (EPS, net income divided by shares outstanding) doubles from $0.10 to $0.20. Accretive means the buyer's EPS goes up after the deal. A and B each earn $10mm of net income (market cap divided by the P/E, or price-to-earnings, ratio). The $100mm of new debt costs $4mm a year after tax, and the $5mm of synergies (extra profit from combining the companies) adds $4mm after tax. That's $20mm of combined net income over A's 100mm shares. The share count stays put because A pays with borrowed money and issues no new stock.

Public SaaS EV/NTM revenue multiples currently range from ~1x–3x for distressed names to 15x–25x+ for elite growers, with a median around 6x–8x—moderate historically, below the 2021 peak but above the 2022 trough, with significant bifurcation driven by growth, profitability, and AI exposure.

Revenue minus COGS and operating expenses gives EBIT; tax-affect it at (1 – t) to get NOPAT, then add back D&A, subtract CapEx, and subtract increases in net working capital to arrive at Unlevered Free Cash Flow.

For generative AI, the key drivers are compute infrastructure scaling, inference cost deflation, enterprise adoption conversion from pilot to production, regulatory moats consolidating incumbents, and the open-vs-closed ecosystem split determining where margin accrues across the value chain.

Deferred revenue is a balance sheet liability representing cash collected from customers before the related goods or services have been delivered, recognized as revenue over time as the company fulfills its performance obligation.

All three sources (cash, debt, stock) are accretive since B's 6.67% earnings yield exceeds each funding cost; break-even P/E limits are ~41.7x for cash (2.4%), ~20.8x for debt (4.8%), and 20.0x for stock (5.0%), assuming 100% financing from a single source and no synergies or other adjustments.

Assuming an all-stock deal with no premium, the acquisition is accretive because Company A's P/E (20x) is higher than Company B's P/E (10x), meaning A buys more earnings per share than it gives up.

Breakeven synergies are $10,000. Company B costs $200,000 ($40 share price × 5,000 shares), so A issues 4,000 new shares at its $50 price. The combined company earns $60,000 over 14,000 shares, about $4.29 of EPS (earnings per share). Holding A's $5 EPS takes $70,000 of net income. The gap is $10,000. This assumes A pays B's current market price with no premium or fees, and that synergies (extra profit from combining the two firms, such as cost savings) are counted after tax.

A transaction is accretive when the earnings yield acquired from the target exceeds the cost of the capital used to fund the purchase, meaning you buy more earnings per dollar than you give up or pay to finance the deal.

Enterprise value (EV) is $1,200. The $20 of annual interest at a 10% rate implies $200 of debt ($20 ÷ 0.10). EV is equity value plus debt minus cash, and no cash is given, so EV = $1,000 + $200 = $1,200. The question's other figures aren't needed to reach the answer, but they are consistent with it.

First verify the data inputs (EV components, EBITDA period, calendarization); if correct, investigate fundamental causes like depressed EBITDA, M&A premium, or higher growth; then either fix the error, footnote an adjusted multiple, or exclude with explanation—never silently delete.