Mergers and Acquisitions Case Interview Walkthrough: McKinsey-Style

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In this Mergers and Acquisitions Case Interview Walkthrough, Jenny Rae (the interviewer) pushes Yuan (the interviewee) in a non-traditional, McKinsey-style case. This virtual case interview features the M&A case framework.
Watch to the end (timestamp below) to see Jenny Rae deliver direct feedback on Yuan's performance in the case. Follow along with pen and paper and see how you fare with this McKinsey-style mergers and acquisitions case interview!
Questions we’ll answer in this video:
◈ “How do I pass a McKinsey case interview?"
◈ “How do you solve a mergers and acquisitions case interview?"
◈ "What is a McKinsey case interview like?"
◈ "How do you structure a McKinsey mergers and acquisitions case interview?"
Highlight Timestamps:
02:43- Case intro
04:55- Background of the case
06:47- Case recap
10:14- Building a structure for the case
46:53- Final recommendation
49:57- Feedback by the interviewer
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[@Stan-san]

Easier to just add 100%*18+25%*12+10%*20 = 23 dollars/person on average and then multiply by the expected number of daily customers. Finally multiply by 350

[@shambhvilokre]

This was very helpful! Please keep making more such walkthroughs for different scenarios.

[@Managementconsulted]

Thank you! We have many more walkthroughs in this playlist: kzbin.info/aero/PLDQSMulzBqek-jVZj1CUSyP2T49VxEC-O

[@Vinckw]

Great interview, love the comprehensiveness and analysis at the end. Thanks :)

[@Managementconsulted]

Our pleasure!

[@Linch1835]

So much fun to be solving the case along the candidate and realizing i'd try to solve it very differently!

[@Managementconsulted]

Great insight - thanks for following along! ;)

[@OSS976]

These videos have been a game changer for my prep

[@OSS976]

Seeing similar flaws that I tend to perform and also strengths I can improve on that these volunteers perform.

[@BrianK683]

This was truly a fun case, quite insightful. Thank you🎉

[@shawnakasmallchange]

This was awesome. My initial hypothesis would’ve been no because of covid uncertainty and the amount of competition. I would’ve revised it to yes, but at a discount due to strong profit margins and differentiation. Easy to raise prices, provide delivery services and create culture war against covid down south as competition closes down.

[@ronaldmoirangcha638]

Great video, this is currently my prep channel for business cases

[@Managementconsulted]

Glad to hear our videos have been useful! Make sure you are on our email list to be notified of live case walkthroughs taking place: managementconsulted.com/subscribe/

[@leomarti1913]

Great video, thanks!

[@Managementconsulted]

You bet!

[@ec4255]

This was super helpful! A little confused about the calculation using the DCF rate and the growth rate. Would it be valuation = (our profit x 22 restaursnts)/(0.08)?

[@ratchanadwangrungarun378]

When you use EBITDA for the DCF method, isn't that going to inflate the value of the firm since we haven't take capital expenditure, net working capital into consideration? Especially, the restaurant business is one of the most capital intensives businesses because you need to invest your earnings to open new branches, especially this restaurant had 22 branches, which there is room to expand unless you justify your answer by using the franchise model to expand. Also, in the video, the profit that she got is operating profit, not the net profit. Therefore, the P/E ratio is definitely higher than 7, isn't it? Also, you gave clues when you described the restaurant at the beginning. My gut feeling at the beginning would be yes because the restaurant has successfully duplicated itself to other states with 22branches. It's probably doing very well before Covid. The location is quite good as well.

[@DH0518]

Yeah, I think that she should asked about the interest and tax cost after having the operating profit

[@Dakid015]

Do you think she should have used the cash flow statement to determine the cash flows in the DCF? That seems like that would be the more appropriate approach. Because you know the true cash flows of the business rather than just relying on income.

[@Gunzberg]

If she'd done avg. revenue per customer via a weighted avg, she would have saved herself lots of time. Fell down quite a bit at the end on why/how of interest to PE

[@mihail4391]

Thanks for publishing this. May I please clarify one detail: are calculators not allowed on such cases?

[@linglindaband]

For MBB and consulting co, no. For banking, maybe

[@Managementconsulted]

Calculators are not allowed in case interviews in almost all instances.

[@omaraltannir2426]

you mentioned the multiplier and the CF discount. Where does the candidate use these given?

[@DH0518]

She failed to answer that, but as the EV is 1.2bn, the PE should be around 8 in this case

[@DH0518]

Oh, never mind, she said the PE is 8x at the end 😂

[@amandaz2804]

I had a final case interview a week ago with Amsterdam office (financial advisory) and didn't pass it. I had the same problem as Yuan cuz my feedback was that I had a really strong beginning, and my structure was nice, but then I got a bit lost during the process...I would like to know HOW one can avoid giving too much irrelevant information for a case interview and go straight to the point..

[@erwinthio6687]

firstly, you should be clear. 2nd you should be creative (but clear) and 3rd have a bit of idea of framework and relevancy 1. in the case of yuan - be clear and concise Structure - PE Acquire (Finance) hence 4 things I should check: 1. (what is totally missing in any M&A case sometimes is as simple as this) Why the owner want to sell - do they need financial / strategic buyer ? 2. If say Financial (1) is good - what would be the kind of number they look for - hence I need to know EBITDA and what kind of typical valuation (just say multiple approach for example) 3. Can the PE make profit - if so how? - be creative in here - sale to a larger player, go IPO, sale it separately, grow the lower business segment, make a sub-brand - 4. Can the PE acquire it now? what will be the investment horizon, can the PE have the operating skillset then you should gather info, make recommendation and in the M&A case - for the sake of god - people just have to say next step if for us to gather more info, perform prelim DD, understand their financial further - borrowing etc and introduct both parties Done deal

[@sharonzarfati2523]

Why under the costs bucket they didn't mention any rent? Of course the profitability is over 40%..

[@ngedwin6174]

I think it will really help if she cuts down on those "erm, erm"... I am only 7min into the clip and that is getting overwhelming. Just take a short pause to sort out the brain work would be so much cleaner. Understood that she is still a student at the point of interview, so this is just a suggestion. Interview is more than just audio even when it is over zoom or any other web conferences, and people certainly want to deal with just solving numbers. I would totally let the restaurant run in into financial difficulties during covid before offering a buyout at a distress price, from a PE perspective. (Assuming it is a worthwhile firm) If they don't, then all the more this firm is worth buying up, and I would have a contract signed to tie the current management for next 3 years with extendable option for 2 more.

[@Managementconsulted]

Edwin - it's great to see you're watching super closely. The direct approach to the answer is super important for Bain and McKinsey, so good call on that. As to the substance of the insight - the personalization for strategy could be helpful but might be outside the scope per PE, so the rec can stay within the guidelines of "yes or no" now vs. "maybe" later.

[@rutviktidke07]

Really great video. But can you help me understand how you reach 1.2 billion dollar as capital investment?

[@n.bashenn3484]

Can someone explain to me at the end her explanation with EBITDA and discount rate and growth rate? What exactly does she calculate?

[@shokkatoammerda]

EBITDA/(discount rate - grow rate)

[@Japanese_visually]

Are you looking for people to do more case interviews? I would me more than happy to do one online with you. You can upload the video on youtube of course.

[@nadeemabdulla8421]

At 32:50 Jenny said staff costs per location is 3.5 million per year. In simple terms what does that mean? Per location meaning 3.5 million for 1 out of 22 restaurants per year,Right?

[@alwynliew8247]

What she was explaining is probably for a single location because 3.5mil per year averaged down to 300k per month... for 60 staff is around 5k per staff... that's about right... not for 22 locations definitely...

[@jakebest5601]

This confused me as well. There were 22 restaurant locations but when it came to calculating the value of the business, were we only considering one restaurant or the whole chain? I didn't know whether we had to do 3.5 million x 22 as it was stated "3.5 million per location", but it was probably meant as 3.5million across all restaurants. This little minor detail should've been clarified imo, as it changes the calculations massively.

[@sobhishawaf8458]

I dont think it is realistic to expect a margherita themed restaurant, specialized in sit-in food to cope well with COVID-19 adjustments such as takeaway and delivery. In the context in which the problem was initially framed, the initial recommendation should have been not to acquire. That being said, restaurant has obviously had previous success by opening up 22 branches, so if a closer look at finances shows stable profits/growth before the pandemic, then the brand name alone could prove appealing and worth an investment at a discount price.

[@nextgroup8262]

the greatest question is why the acquisition and why now

[@Slashtap]

Wow

[@asdasdd320]

Surprised that she has 40 cases under her belt and was quite unconfident and had a very cookie cutter approach without being able to react to even the "slightest" curveball questions. I understand that the situation must be stressful, but presume that she is not a business graduate or yet worked in operative roles.

[@johnnyzaza]

There is certainly a learning curve for some cultures to speak up. In some Asian societies it is a sign of disrespect. I believe this played into her misunderstanding of the restaurant concept and her inability to gain insight from inquiry. While her analysis could be deemed cookie-cutter, I do believe it was sufficient to proceed onto a group case. Consistent with the cultural analysis angle I believe this is why she struggled with the situational or curveball questions. A common perspective is that the quantitative skills are often present but the critical thinking component is lacking and requires further development. I believe that is true for this case as well. Overall 8.3/10 imho

[@asdasdd320]

@@johnnyzaza Good thoughts, but I'll still disagree with you. First - Yuan is a MIT under grad. and based on her introduction definitely not an immigrant, but rather a first or later generation American. Pulling out a cultural card does not really fall into place here imo. She is a student in one of the best universities in the world and a US citizen. Second - there are no group cases for McKinsey (at least when I interviewed and got an offer, nor to other MBBs). So not sure where she would be moving forward. Third - it is exactly the going beyond the basics / cookie cutter answers that MBB recruiters look for. Not for someone who can just implement a framework they've memorised. Based on her performance imo the quantitative skills would not be enough to pass the interview. In my experience, the quantitive skills can be learned later, but what is harder to coach is the ability to think out-side-of-the-box and be creative. You really need to be a well-rounded candidate to advance to the top tier consultancies. Being able to observe the world from different perspectives just requires time and I'd suggest Yuan would complete an internship or few in industry and get some operational experience.

[@jollyholly2851]

@@asdasdd320 Yuan is MIT graduate not undergrad. She's already spent 4 years in US at UT Austin. You're making assumptions. She seems to be an international student too.

[@asdasdd320]

@@jollyholly2851 Yeah - sorry got the terms mixed up. I meant that she has already graduated her under grad so she has a bachelor's degree already. More to my point, she is not a new student who has not already spent time studying hence one would presume her to perform better.

[@jollyholly2851]

@@asdasdd320 agreed

[@OYEsingh]

This is hard to watch

[@JJ-zy3zv]

agreed

[@lauragallon9191]

this case is long af

[@jlee7740]

She doesnt know how PEs make money lol...

[@kemingyu4266]

Probably out of the scope of a case but yes. Would probably also have to look at the debt capacity of the restaurant and check whether debt can be reliably paid down using cashflows. The culture fit thing also probably doesn't matter for an LBO. But overall her commercial analysis is pretty on point.

[@phd_angel4192]

Such a poor performance makes me wonder: How was this lady able to get a job at Bain?!… How?…

[@inezjames4192]

She might have improved, or it could have been that she wasn’t familiar with an atypical case type such as this, and she got extra nervous knowing this was going to be broadcasted. Tbh most of her analysis appears to be on-point, just that she wasn’t confident about her judgment.

[@soumisaha]

candidate was pretty much a waste of time for me to go though with, but this coach is super! such a disappointment given that this candidate has done 40 cases! folks watching this, just solve it by yourself, am sure you will do it better.