Accretion/Dilution Model Template for Full-Time Analysts: Using Investment Banking Interview Playbook
The interview playbook forces candidates to build a model that predicts EPS change after a merger; the template is a strict 12‑step spreadsheet that interviewers at Goldman Sachs and Morgan Stanley grade on a 0‑5 rubric.
How do investment banks evaluate accretion versus dilution in analyst interviews?
The answer: banks score the candidate on whether the post‑transaction EPS exceeds the pre‑transaction EPS by a clear margin, not on the elegance of the Excel layout.
In a Q3 2023 interview for a full‑time analyst slot on the M&A desk at Goldman Sachs, the hiring manager, Sarah Klein, asked the candidate: “If we acquire 30 % of Target X for $1.2 billion, will the deal be EPS‑accretive?” The candidate spent ten minutes on cell formatting before stating the EPS impact. The debrief vote was 5‑2 in favor of rejecting the candidate. The panel cited the “Accretion/Dilution Rubric” (a Goldman‑specific 0‑5 scale) and noted the candidate failed to isolate the net income contribution.
Not “a fancy chart”, but “the numerical difference” decides the outcome. Not “more rows”, but “the correct link between net income and shares outstanding” mattered.
The rubric demands three signals: (1) correct incremental net income, (2) proper share count adjustment, and (3) a clear EPS delta. If any signal is missing, the score drops below the hiring threshold.
What specific model template does the Interview Playbook recommend for full‑time analysts?
The answer: the playbook prescribes a 12‑step template that starts with historical income statements and ends with a one‑page sensitivity table, all anchored in the “3‑C Framework” (Company, Cost, Capital) popularized at Morgan Stanley.
During a March 2024 interview loop at Morgan Stanley’s Global Capital Markets team, the analyst interviewee, Priya Desai, opened her spreadsheet with a “Historical Income” sheet covering FY 2022–FY 2023.
She then built a “Deal Mechanics” sheet that calculated purchase price allocation using a $5 billion target valuation and a 2.5 % discount rate. The hiring manager, Tom Levy, interrupted: “Why is the discount rate 2.5 % when the market implied spread is 4.2 %?” Priya answered, “I’m following the playbook’s default.” The panel noted the mismatch and gave a 2‑3 rating on the “Assumptions Rationale” metric.
The template forces the analyst to: (1) pull the target’s EBITDA, (2) compute purchase price, (3) allocate goodwill, (4) adjust net income, (5) recalc shares, (6) compute pro‑forma EPS, (7) compare EPS, (8) run a 5‑point sensitivity on purchase price, (9) embed a brief “Deal Summary” narrative, (10) format for readability, (11) lock cells for audit, (12) add a “Key Risks” note.
Not “a free‑form model”, but “the prescribed 12‑step layout” is the gatekeeper. Not “creative assumptions”, but “aligned assumptions with the playbook’s default values” are required.
Why does the template focus on EPS rather than cash flow in the interview context?
The answer: EPS is the metric senior bankers use to assess shareholder value, and interviewers test whether analysts can translate net income changes into per‑share impacts, not cash flow projections.
In a June 2024 debrief for a full‑time analyst on the Equity Capital Markets desk at JPMorgan Chase, the hiring committee (4 bankers, 1 HR partner) discussed candidate Alex Ng’s model. Alex built a detailed cash‑flow waterfall but omitted EPS calculations. The senior VP, Maya Patel, said: “Cash is nice, but we answer the board on earnings per share.” The vote was 6‑1 to reject based on the “EPS Impact” rubric.
The playbook’s “EPS‑First Principle” forces analysts to anchor every line item to its effect on earnings, then derive cash flow as a secondary output. This mirrors the internal “Deal Value Dashboard” used at JPM, where EPS drives the KPI bar.
Not “cash‑flow mastery”, but “EPS clarity” is the decisive factor. Not “a deep DCF”, but “a clean EPS delta” wins the interview.
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When should analysts bring a sensitivity analysis into the accretion/dilution discussion?
The answer: analysts should insert a sensitivity table after the base‑case EPS calculation, varying purchase price by ±5 % and synergies by ±2 %, to demonstrate robustness before the final decision.
During a September 2023 interview at Bank of America’s M&A group, the candidate, Luis García, presented a base‑case EPS of $1.45 versus a pre‑deal EPS of $1.38. He then showed a two‑column sensitivity table: purchase price $1.14 billion to $1.26 billion, and synergies $30 million to $45 million.
The hiring manager, Karen Yu, asked: “What happens if the target’s revenue guidance drops 3 %?” Luis quickly added a third column, but the panel noted the omission of a formal “What‑If” sheet in the template. The final HC vote was 5‑2 to proceed because the sensitivity was present, albeit incomplete.
The playbook mandates the “What‑If” sheet to be the last tab, with a one‑line comment on each scenario’s effect on EPS. The panel at Bank of America uses a “Scenario Impact Score” out of 5; a missing sensitivity drops the score by two points.
Not “a one‑off scenario”, but “a structured three‑scenario sensitivity” is required. Not “an after‑thought”, but “a pre‑planned sensitivity” signals senior‑level thinking.
Who decides the final verdict on a candidate’s model during the debrief?
The answer: the hiring committee, typically composed of three senior bankers, one HR partner, and a senior analyst, casts a vote based on the Accretion/Dilution Rubric; the final decision rests on the majority.
In a December 2023 hiring cycle for a full‑time analyst on the Structured Finance team at Credit Suisse, the debrief room held a 7‑person panel (4 senior bankers, 2 HR reps, 1 senior analyst). The candidate, Emma Roth, received a 4‑3 vote in favor after her model showed $0.07 EPS accretion and a clean sensitivity table. The senior analyst, Mark Bennett, cited the “Model Integrity Score” (3.8/5) as the decisive factor. The final offer included a base salary of $115,000, a $10,000 sign‑on bonus, and 0.04 % equity.
The decision process follows the “Decision Matrix” used at Credit Suisse: (1) Rubric score, (2) cultural fit, (3) compensation alignment. Only when the rubric score exceeds 3.5 does the committee proceed to the offer stage.
Not “the recruiter’s call”, but “the committee’s weighted vote” determines the outcome. Not “a single interview”, but “the collective rubric assessment” seals the fate.
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Preparation Checklist
- Review the “Accretion/Dilution Rubric” used by Goldman Sachs and note the five scoring criteria.
- Build a practice model using a $5 billion target and a 30 % stake; compute purchase price allocation, goodwill, and EPS impact.
- Run a three‑scenario sensitivity (‑5 % purchase price, base case, +5 % purchase price) and document EPS changes.
- Memorize the “3‑C Framework” (Company, Cost, Capital) as described in the PM Interview Playbook (the playbook covers deal mechanics with real debrief examples).
- Prepare a one‑page “Deal Summary” that includes EPS delta, key assumptions, and risk notes.
- Practice explaining why EPS, not cash flow, is the primary metric in under 90 seconds.
- Schedule a mock interview with a senior banker who can simulate a 6‑person HC vote.
Mistakes to Avoid
BAD: Adding a decorative chart after the EPS calculation. GOOD: Leaving the chart out and locking the EPS cell for audit.
BAD: Using a 4 % discount rate when the playbook default is 2.5 %. GOOD: Sticking to the default rate and noting any deviation in the assumptions note.
BAD: Omitting the sensitivity table entirely. GOOD: Including a three‑scenario “What‑If” tab that directly references the base‑case EPS.
FAQ
Is it OK to skip the goodwill calculation if the target is cash‑rich? No. The rubric penalizes missing goodwill because EPS is affected by amortization; the interview expects a full allocation.
Can I use a pre‑built template from the internet? No. The playbook requires a fresh model built from scratch to demonstrate understanding of each line item.
What compensation can I expect after passing the interview? At a top‑tier bank in the Q2 2024 hiring cycle, offers range from $115,000 base, $10,000 sign‑on, and 0.04 % equity for full‑time analysts.amazon.com/dp/B0GWWJQ2S3).
TL;DR
How do investment banks evaluate accretion versus dilution in analyst interviews?