IB Interview Questions: M&A : Level 3 M&A Questions

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1. What is the P/E of Cash and Debt?

The P/E of Cash and Debt reflects the inverted after-tax cost of Cash and Debt in an M&A deal.

2. Does an Asset or Stock deal typically create a Deferred Tax Liability?

A Stock Deal typically creates a Deferred Tax Liability because in a Stock Deal there isn’t a step-up in basis for Tax purposes, which creates a disconnect between GAAP and IRS Tax Expense.

3. Is Goodwill amortization tax-deductible in an Asset Sale? Stock Sale?

Goodwill amortization is tax-deductible in Asset Sale but not in a Stock Sale .

4. Do buyers generally prefer asset sales or stock sales? Why?

Buyers often prefer Asset Sale structures because the Asset sale structure creates a step-up in basis. The increase in basis creates to tax savings via increased Depreciation and Amortization expense over time, which arises from the Purchase Price Allocation process.


IB Interview Questions: M&A : Level 1 M&A Questions

IB Interview Questions: M&A : Level 2 M&A Questions

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