Mergers and Acquisitions (M&A)

Mergers and Acquisitions (M&A)

What is M&A?

  • M&A bankers advise client companies on mergers (which means that two companies join as equals) and acquisitions (i.e. one firm buys another)
  • Specialists in this field have the chance to work on deals that reshape entire industries
  • To bring a transaction to successful completion M&A bankers need to go through various steps:
    • Identify potentially relevant target companies based on defined acquisition criteria that are directed by management
    • The available information can be used to decide whether a deal is feasible or not
    • Unreasonable price expectations, operational differences or cultural contrasts might thwart a deal.
  • A very important step in the M&A process is due diligence: the evaluation and confirmation of financial and operational information, as conveyed by the target company’s management as well as assessing operational and legal risks behind the deal.
    • After this is completed, one needs to go through the valuation and the structuring of the deal
    • This stage involves applying a combination of valuation techniques, such as the discounted cash flow (DCF) method.
  • M&A professionals also look at similar companies within the industry and assess comparable multiples.
  • Structuring the deal involves negotiating issues such as pricing, salaries, ownership liabilities and securing financing for the deal.

Career progression

  • People working in M&A typically specialise in a particular sector (e.g. media and telecommunications, natural resources or financials)
  • The more senior you get in M&A, the more you’ll face clients.
  • As a junior, your main tasks will include complex financial modelling and doing research to put together ‘pitch-books’.
    • This is a document a firm will use to outline its ideas on which companies a client should be buying, or which it should be selling to.
  • The key focus on an analyst’s work is on financial modelling and valuation. The same is true for an associate, even though associates take on ‘higher level tasks’.
  • As you rise up the hierarchy, you obtain more and more responsibility for the strategic side of the deals and the negotiations with stakeholders of the M&A process.

Required skills

  • Considerable commitment with long working hours
    • M&A bankers advise clients at what are often stressful and critically important periods in a company’s lifetime. This requires them to be available whenever the client needs them, whether that be late at night or over weekends.
    • You need stamina and attention to detail.
  • Despite the high workload, the work needs to satisfy the highest standards of accuracy due to the high stakes involved in every transaction.
  • Numerical and analytical skills are essential, since the main focus is on dealing with a company’s financial situation.
  • Languages can be useful for working with oversees clients.
  • Good social skills as you will be working in teams and deal with clients.
  • The more senior you become, the more important are negotiations skills, networking and the ability to build up and maintain relationships with clients.