"Walk me through what happens when Company A acquires Company B" is one of the most common M&A interview prompts at the analyst and associate level. Interviewers ask it because it tests several skills at once: whether you understand how a deal's financing structure flows through the income statement, whether you can hold multiple moving pieces in your head, and whether you know what the final number actually means.

Structure Your Answer Around Five Building Blocks

Rather than trying to memorize a script, walk the interviewer through the same five pieces every merger consequences model needs, in order:

  1. Start with the standalone numbers. State the acquirer's net income, diluted share count, and share price, and the target's net income. This is your baseline — everything else is an adjustment on top of it.
  2. Split the consideration. Multiply the purchase price by the cash percentage and the stock percentage to get the dollar amount of each. This single split is what determines both your new debt and your new share count.
  3. Convert the stock portion into new shares. Divide the stock consideration by the acquirer's share price. Say explicitly that this is the dilution side of the model — more shares outstanding means the same earnings get spread thinner.
  4. Convert the cash portion into an after-tax interest cost. Multiply the new debt by the interest rate, then apply the tax shield: rate × (1 − tax rate). Don't forget this step — quoting the pre-tax interest cost is one of the most common mistakes candidates make under pressure.
  5. Combine and compare. Add the acquirer's and target's net income, add after-tax synergies, subtract after-tax interest expense, then divide by the new total share count. Compare the result to the acquirer's standalone EPS to call the deal accretive or dilutive.

Say the Formula Before You Say the Number

Interviewers are listening for structure, not just a final figure. Before you plug in numbers, say the formula out loud: "Pro forma net income equals acquirer net income plus target net income plus after-tax synergies minus after-tax interest expense." Then plug in the values one at a time. This signals that you understand why each term belongs in the equation, not just that you can execute a memorized calculation.

Anticipate the Follow-Up: "So Is This a Good Deal?"

Almost every interviewer follows an accretion/dilution answer with some version of "does that mean it's a good deal?" The strong answer is no — not by itself. EPS accretion tells you about near-term earnings optics, driven heavily by the cost of debt relative to the target's earnings yield. It says nothing about whether the acquirer paid a fair price, whether the synergies are realistic, or whether the deal earns its cost of capital over time. Naming that distinction unprompted is usually what separates a strong answer from an adequate one.

Practice the Full Calculation

The best way to internalize this structure is to run the numbers yourself rather than just reading through the logic. The Merger Consequences Model case study walks through a complete example — acquirer and target financials, a cash/stock split, new debt, synergies, and the resulting pro forma EPS — with a full model answer to check your work against. If you want to isolate the accretion/dilution mechanic on its own first, start with Accretion/Dilution: The Basic Concept before returning to the fuller merger model.