The investment banking interview question we’re going to go over today is “Why would a company want to acquire another company?” Here’s what you can say.
“Companies want to acquire other companies usually because there’s a strategic rationale and because there’s financial benefit. Strategically, a company could see an acquisition as a way to expand into a new market, to broaden its product portfolio, or to consolidate the market. This strengthens the company’s market position and makes it a stronger business. Financially, acquisitions can also create synergies, which makes the pro forma company even more profitable. That’s why companies want to pursue acquisitions.”
That’s how you should answer this question: “Why would a company want to acquire another company”. There are plenty of other things you can say too, such as maybe the target is undervalued, maybe the acquirer wants to gain access to the target’s intellectual property, or maybe the acquirer wants to obtain the target’s employees. Feel free to mix and match, but these are some examples of strategic rationale.