As self-respecting finance professionals, we’re all familiar with the allure surrounding the Mergers and Acquisitions sector. Between grueling hours and extravagant bonuses, the world of Mergers & Acquisitions (or ‘M&A’), though highly sought after by many students, remains a complex field. But don’t worry! We’re here to help you demystify this highly coveted sector.

What is Mergers and Acquisitions (M&A)?

The term “Mergers and Acquisitions” refers to the combination of two companies, one buyer (“Buy side”) and one seller (“Sell side”), or the acquisition of one company by another. An M&A transaction can take various forms, such as the sale of one company to another, the acquisition of a target company, the purchase or sale of a division of a company, or the transfer of specific assets.

To successfully carry out a sale or acquisition, both companies typically engage investment banks to act as financial advisors during the transaction.

• In a Sell-side transaction (seller’s perspective), the bank assists the selling company.
• In a Buy-side transaction (buyer’s perspective), the bank supports the purchasing company.

Types of Mergers and Acquisitions
Beyond the simple distinction between buyer and seller, there are several types of M&A transactions, primarily differentiated by the buyer’s strategic goal:

1. Vertical Integration: this involves acquiring a customer and/or supplier.

Example: In 1996, Time Warner acquired Turner Broadcasting System. This acquisition allowed Time Warner, which produced audiovisual content, to establish its own distribution channels. Similarly, in the late 19th century, Rockefeller’s Standard Oil used this strategy by acquiring gas stations, thereby controlling the entire value chain, from crude oil extraction to delivering fuel to end customers.

• Horizontal Integration: this involves acquiring a competitor in the same market.

Example: In 2014, Fiat (an Italian car manufacturer) merged with Chrysler to form Fiat Chrysler Automobiles. This merger enabled Chrysler to access the European car market and Fiat to enter the U.S. market.

• Conglomerate: this involves combining companies with different business activities.

Example: LVMH (Louis Vuitton Moët Hennessy) is a prime example of a conglomerate. As the global leader in luxury goods, LVMH encompasses a wide range of businesses, including fashion (Dior), leather goods (Louis Vuitton), spirits (Hennessy), vineyards (Moët champagne), jewelry (Tiffany), and watchmaking (Tag Heuer).

Classifications of M&A Transactions
M&A transactions are categorized into three distinct classifications based on their size:

• Small Cap: transactions with a sale price below $2 billion.
• Mid Cap: transactions with a sale price between $2 billion and $10 billion.
• Large Cap: transactions with a sale price exceeding $10 billion.

The size of the transaction determines the level of complexity and the number of participants involved.

• Small Cap Transactions: Large companies may handle Small Cap deals internally, as they often have the necessary expertise and resources, eliminating the need to hire an investment bank.
• Large Cap Transactions: These deals involve numerous stakeholders, including investment banks advising both the buyer and seller, accounting firms assessing the financial impact, and specialized law firms ensuring compliance with laws, particularly antitrust regulations.

Key Players in Mergers and Acquisitions (M&A) Transactions and Their Roles

Investment Banks

Investment banks play a critical role in M&A transactions, managing the entire process from start to finish. From pitching the company for sale, estimating valuations, organizing meetings between buyers and sellers, or participating in negotiations, they act as the conductor of the transaction.

Their role is twofold:

• As financial advisors, they help calculate valuations.
• As negotiators, they aim to maximize the selling price when advising the seller, or minimize it when advising the buyer.

Mergers and Acquisitions Law Firms

M&A law firms are responsible for drafting all contractual, legal, corporate, and regulatory documentation (e.g., share purchase agreements, management packages).

They also oversee key steps outside the scope of investment banks, such as:

• Consulting employee representative bodies, auditors, and shareholders.
• Handling relations with regulatory authorities (e.g., AMF, Competition Authority, and sectoral regulators).

Their job includes ensuring that the transaction complies with all laws, and that the post-transaction situation aligns with corporate and general legal requirements.

In Large Cap transactions involving major companies, the risk of monopolistic scenarios can arise. For example, when AB InBev (the world’s largest beer company) acquired SABMiller (the second-largest), it risked monopolizing the beer market. To comply with EU competition regulations, AB InBev was required to sell certain brands (e.g., Peroni) to gain approval for the acquisition.

M&A law firms negotiate such arrangements with regulators and advocate for their clients’ interests.

Examples of M&A law firms: Bredin Prat, Darrois Villey Maillot Brochier, Cleary Gottlieb Steen & Hamilton, Skadden.

Audit Firms

Audit firms contribute their expertise during the due diligence phase, primarily through their transaction services teams. They audit the transaction and verify the authenticity of shared documents between the companies and external stakeholders.

The “Big Four” (KPMG, Deloitte, EY, PWC) also have M&A teams capable of acting as investment banks, although M&A is not their primary focus.

Examples of non-Big Four audit firms: Mazars, BDO.

Types of Investment Banks in Mergers and Acquisitions

Bulge Bracket Investment Banks

The giants of M&A, these global banks provide a full range of financial products and services. They handle the largest deals (typically exceeding €1 billion) and operate across all industries. Their reputation and “brand name” make them highly sought after.

Examples: JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch.

Elite Boutique Banks

Smaller than Bulge Brackets, these banks specialize in M&A and restructuring. Despite their narrower focus, they are equally prestigious and offer excellent career opportunities.

Examples: Lazard, Rothschild & Co, Evercore, Moelis.

Middle Market Banks

These banks offer a wide range of financial services and have a global presence but typically handle deals under €1 billion. While slightly less prestigious than Bulge Brackets and Elite Boutiques, a role in one of these banks still enhances any CV.

Examples: Lincoln International, Macquarie, Baird, Houlihan Lokey.

Industry-Specific Boutiques & Regional Boutique Banks

• Industry-Specific Boutiques: These banks focus on specific sectors and deals under €100 million, offering deep expertise in their chosen fields. Examples: Allen & Co (Technology, Media, Telecommunications), Clipperton Finance (TMT), Green Giraffe (Energy).

• Regional Boutique Banks: These smaller banks focus on Mid Cap and Small Cap transactions in specific regions. Examples: Largillière Finance, In Extenso Finance & Transmission, Equideals.

Steps in a Mergers and Acquisitions (M&A) Transaction

The steps in an M&A transaction vary depending on whether the investment bank represents the Sell-side (seller) or the Buy-side (buyer).

Sell-side (Seller’s Perspective)

1. Initial Meetings and Information Gathering: the investment bank meets the selling company to gather essential information about its business. Based on this, a “teaser” (a short, anonymous document summarizing the company and its key metrics) is created, along with a list of potential buyers.
2. Validation and Commercial Outreach: the teaser and buyer list are reviewed and approved by the seller. The bank then sends the teaser to selected potential buyers, demonstrating a deep understanding of the seller’s industry to target relevant buyers.
3. Non-Disclosure Agreement (NDA): interested buyers sign an NDA, agreeing to maintain confidentiality about the seller’s information.
4. Investment Memorandum: after signing the NDA, buyers receive a detailed investment memorandum containing: a comprehensive company description, sectoral and competitive analysis, financial statements and valuation metrics. This document forms the basis for price discussions.
5. Expression of Interest: potential buyers who wish to proceed submit an indication of interest after reviewing the investment memorandum. The bank organizes meetings between the seller and interested buyers.
6. Letter of Intent (LOI): buyers who remain interested submit an LOI, including a firm offer price.
7. Due Diligence: if the seller accepts the LOI, the due diligence phase begins. Buyers thoroughly verify all financial, legal, administrative, and technical claims. A “Data Room” (a secure virtual platform) is used to share documents. The lawyers and the investment bank verify every detail to minimize risks.
8. Share Purchase Agreement (SPA): After due diligence, the SPA is drafted to finalize the transaction terms.
9. Closing and Integration: Both parties sign the SPA, completing the transaction. Post-closing adjustments (financial, legal, or accounting) may follow, along with the integration of the seller into the buyer’s organization.

Buy-side (Buyer’s Perspective)

1. Target Search and Analysis: the investment bank identifies potential acquisition targets based on the buyer’s criteria. It ensures that the acquisition aligns with the buyer’s goals, identifying possible synergies.
2. Teaser Creation and Outreach: a teaser is sent to potential sellers, outlining the buyer’s acquisition intent.
3. Non-Disclosure Agreement (NDA): the bank signs an NDA with sellers who respond positively, gaining access to their investment memorandum.
4. Evaluation and Presentation: the bank prepares detailed presentations for the buyer, analyzing each target and providing valuation estimates.
5. Meetings and Decision: meetings are held between the buyer and selected targets. If the buyer is interested, an LOI with a firm price is submitted.
6. Due Diligence: after LOI acceptance, the due diligence process begins, mirroring the seller-side process.
7. Share Purchase Agreement (SPA): post due diligence, the SPA is drafted and agreed upon.
8. Closing and Integration: the transaction is closed with the SPA signing. Post-closing adjustments may occur, and the acquired company is integrated into the buyer’s organization.

Sell-Side or Buy-Side: Which Side Should You Choose?

Not sure whether to go for the sell-side or buy-side? Don’t worry, here’s a breakdown of the advantages of each. It’s up to you to decide which aligns best with your preferences.

Sell-Side in Mergers and Acquisitions

• By definition, chances of closing a deal are higher than on the buy-side.
• You’ll delve deep into a single company and its industry.
• You’ll follow the transaction from start to finish.

Buy-Side in Mergers and Acquisitions

• You’ll develop an “investor mindset,” which could be highly appealing if you plan to transition into private equity.
• The variety of companies you analyze will provide broader experience compared to the sell-side, where you focus on one company per transaction.

The Biggest Mergers and Acquisitions Deals in History

Below is the top five list of the largest M&A deals ranked by valuation.

Heads up: we’re talking billions here, along with the bonuses for bankers and lawyers! Deals like these have inspired countless movies, novels, and reams of press coverage (and contracts).

1/ Vodafone AirTouch & Mannesmann AG – $202.8 Bn

In February 2000, British company Vodafone AirTouch acquired German conglomerate Mannesmann AG for $202.8 billion. The early 2000s were marked by the internet bubble and soaring valuations in the telecom sector, which helped this deal reach such astronomical heights.

Let’s just say that after this deal, all the bankers involved probably treated themselves to bespoke suits and fancy Italian convertibles. Even Gordon Gekko from Wall Street would’ve been envious of a deal this massive!

Banks Involved: Warburg Dillon Read, Morgan Stanley, Merrill Lynch, JP Morgan, and Deutsche Bank.

2/ AOL & Time Warner – $181.6 Bn

Also during the internet bubble, AOL and Time Warner merged to create AOL Time Warner. Unfortunately, the deal closed just before the bubble burst, with AOL shares losing 60% of their value within two years. (Don’t worry, the bankers still got their bonuses for this one.)

In Q1 2002, the group reported a record net loss of $54 billion. By 2009, AOL and Time Warner separated, marking the end of what many consider the greatest M&A fiasco in history. (As they say, “Shit happens…”)

Banks Involved: Goldman Sachs, Merrill Lynch, Salomon Smith Barney, Morgan Stanley.

3/ Verizon Communications & Cellco (now Verizon Wireless) – $130.3 Bn

Verizon Wireless was originally 55% owned by Verizon Communications and 45% by Vodafone. In 2013, Verizon bought out Vodafone’s shares to become the sole owner. It was a wise move, as Verizon Communications is now one of the largest telecom operators in the world.

Banks Involved: JPMorgan, Morgan Stanley, Goldman Sachs, UBS, Merrill Lynch.

4/ AB InBev & SABMiller – $110.3 Bn

In October 2016, AB InBev, a global leader in brewing, acquired SABMiller, the second-largest brewer in the world. When the #1 player buys the #2, the result is a true industry giant!

Savvy readers may recognize AB InBev as the owner of globally renowned beer brands like Budweiser, Corona, Stella Artois, Leffe, and Hoegaarden. Odds are, the beer you pick up at the grocery store is owned by AB InBev.

Banks Involved: Lazard, Deutsche Bank, BNP Paribas, Morgan Stanley, J.P. Morgan.

5/ AT&T & Time Warner – $85 Bn

After the disastrous AOL merger, Time Warner tried again in 2016. This time, it was approached by AT&T, the historic American telecom operator. The merger faced two years of legal challenges before being approved in 2018. Critics argued that the merger would hurt consumers by reducing competition in the sector and limiting choices.

This vertical merger (Time Warner as a content producer and AT&T as a content distributor) created a new entertainment behemoth poised to rival industry leader Disney.

Banks Involved: Perella Weinberg Partners, JPMorgan Chase, Bank of America Merrill Lynch, and Allen & Co.

All You Need to Know About Working in Mergers and Acquisitions

The Responsibilities of an M&A Analyst

At this point in the article, you’ve got a solid understanding of the mergers and acquisitions (M&A) sector. Ready to dive in? Not so fast! Let’s outline the daily responsibilities of an M&A analyst at an investment bank. Keep in mind, this list is not exhaustive:

• Drafting teasers and investment memorandums
• Compiling target company lists
• Conducting sectoral and competitive analyses
• Performing and modeling financial valuations (you’d better know how to use Excel, your high school calculator won’t cut it!)
• Various financial analyses
• Interfacing with clients
• Supervising M&A interns

The tasks of an M&A intern are similar to those of an analyst, with the main difference being that interns are managed by analysts and do not have managerial responsibilities.

Key Skills for a Career in Mergers and Acquisitions

Due to its complex and high-responsibility nature, an M&A analyst role isn’t for everyone, even though it’s a truly exciting job. Below is a (non-exhaustive) list of knowledge and skills highly valued by recruiters:

Hard Skills for M&A

• Advanced knowledge of financial statements and how they interconnect
• In-depth understanding of valuation methods (DCF, DDM, multiples, etc.)
• Proficiency in financial modeling using Excel
• Strong analytical and synthesis skills

Soft Skills for M&A

• Willingness to handle a heavy workload (yes, when a client pays millions to acquire a company worth billions, say goodbye to Friday night drinks with your best friend at 7 PM)
• Attention to detail to produce flawless documents
• Excellent writing skills
• High stress tolerance and strong teamwork abilities

Now you know how to make your resume and cover letter stand out to catch the attention of recruiters!

Career Prospects in Mergers and Acquisitions

You’re convinced that your career should start in M&A, but as forward-thinkers, you’re already considering what’s next. Good for you!

M&A experience opens doors to numerous dream-worthy opportunities.

If you’re looking for a more balanced pace to enjoy weekends with friends, you’ll have a golden ticket for corporate finance roles. Your resume will outshine most, and no recruiter will turn you away.

On the other hand, if you aspire to a life like Harvey Specter’s, here are some post-M&A opportunities to consider:

• Private Equity
• Hedge Funds
• Asset Management
• M&A roles within corporations
• Other divisions in investment banking
• Entrepreneurship (after all, nobody knows business better than an investment banker!)

Why You Should Work in Mergers and Acquisitions

You now know the responsibilities, required skills, and career prospects of an M&A role, but you might still be skeptical about taking the plunge—and that’s valid!

M&A isn’t for everyone, and it’s better to realize that before starting. M&A is particularly suited for those who want to:

• Master corporate finance inside and out
• Excel in financial modeling
• Gain exceptional industry insights
• Build an outstanding work ethic
• Embark on a groundbreaking professional career
• Make a lot of money (the ultimate goal, isn’t it?)

The M&A world is like a professional prep school for corporate finance. Starting your career in M&A will provide invaluable, sought-after experience—a true career booster!

The Downsides of Working in Mergers and Acquisitions

As mentioned earlier, M&A isn’t for everyone. Let’s take a moment to examine the hidden side of the M&A iceberg:

• Tasks can become repetitive after several years in the field (as with most jobs, right?).
• Maintaining a work-life balance will be challenging. It’s the price you pay to become a corporate finance assassin—but the job is so exciting, it’s often worth it.
• The workload is heavy, and you’ll need strong stress management skills.
• Breaking into M&A is tough. In addition to being highly selective, M&A roles are incredibly competitive. Preparation is key if you’re lucky enough to land an interview!

M&A Roles in Corporates

Want to work in M&A but not necessarily at a bank? That’s an option too.

On your quest for the holy grail, you’ll likely come across M&A roles within major corporations (like those in the S&P 500) or innovative startups. Businesses also need in-house expertise to manage their deals—they can’t always rely solely on bankers.

So, what’s the value of an M&A role within a corporate? Let’s break it down:

Advantages

• In a corporate role, you’ll achieve a better work-life balance than in banking. Hours are typically similar to other finance roles because, after a certain hour in the evening, the work is handed off to the bank (you might as well get your money’s worth from the bankers, right?).
• While compensation will be lower than in investment banking, it remains attractive and generally higher than other corporate finance roles.
• As the client rather than the advisor, you’ll be in a position to make demands of investment banks. No more late nights adjusting presentations or Excel models—that’s what the bankers are for! You’ll send your requests at 6:30 PM and expect results by 9:00 AM the next day. Who hasn’t dreamed of that?
• You’ll be at the heart of your company’s strategic and confidential matters, playing an active role in its growth. Plus, the projects you work on will often come directly from top management. Get ready to impress at the coffee machine!

Disadvantages

• Comfort comes at a cost. While you’ll gain work-life balance, you’ll lose out on compensation. Investment banks will always offer higher pay than corporate roles for similar positions and experience. That said, corporate pay is still highly competitive—enough to keep you ahead of your marketing peers (because, let’s be honest, that’s what really matters, right?).
• Your knowledge and expertise will be limited to one sector. As a result, your learning curve won’t be as steep as it would be in investment banking.