If you’re a college student or a recent graduate interested in breaking into the M&A world, figuring out where to start can be daunting.
In this guide, the Grata team breaks down everything that aspiring M&A professionals need to know about how to break into the industry and how to succeed.
From how the dealmaking process works to acing the job interview to the fundamentals that every analyst must master, this is your go-to source for kickstarting your career and navigating the M&A world.
Must-Know Industry Terms
The Basics
Middle market: The middle market refers to companies that are larger than small businesses but smaller than large corporations — typically with revenues between $10M and $1B. This is where most private equity and M&A activity happens.
Venture Capital (VC): Venture capital firms invest in early-stage companies with high growth potential, often in tech or innovation-driven sectors. They take equity stakes in exchange for funding and guidance.
Growth equity: Growth equity investors back more mature companies that are already generating revenue but need capital to expand — think new markets, product lines, or acquisitions.
Private equity: Private equity firms invest in established companies, often taking controlling stakes to improve operations, drive growth, and eventually sell the business for a profit.
Firm Structure
Business Development (BD): BD teams focus on sourcing investment opportunities — building relationships, finding potential deals, and ensuring the firm has a steady pipeline of companies to evaluate.
Investing: In this context, investing means deploying capital into private companies with the goal of creating long-term value and generating returns for the firm’s investors.
Portfolio operations: Once a firm invests in a company, the portfolio operations team helps improve its performance — from strategy and sales to finance and efficiency — to increase its eventual value.
Models
Public comps: Public comparables are publicly traded companies similar to a target business. Analysts use their financial metrics to estimate what a private company might be worth.
Precedent transactions: These are past M&A deals involving similar companies. Studying them helps investors understand what others have paid and what valuations might be realistic.
Market Sizing: Market sizing estimates the total potential revenue or customer base in a given market — crucial for judging whether a business can scale meaningfully.
Unit economic growth: This measures how profitable a company is at the level of a single product or customer — key for understanding if growth will actually translate into sustainable profits.
LBO (Leveraged Buyout): An LBO is when a private equity firm buys a company primarily using borrowed money, then works to grow cash flow and pay down debt to earn a return.
Buy-and-build: A strategy where a firm acquires a strong platform company, then adds smaller “bolt-on” acquisitions to expand market share or capabilities.
Processes
Deal Sourcing: The process of finding potential investment opportunities through networks, databases, advisors, or inbound leads.
Deal Screening: This is the early-stage evaluation of opportunities to determine if they fit the firm’s investment criteria — before investing time and resources into deeper analysis.
Due Diligence: A deep-dive investigation into a target company’s financials, operations, market position, and risks to validate its true value before closing a deal.
Career Ladder
Analyst: Entry-level professionals who handle research, financial modeling, and initial screening to support deal teams.
Associate: Associates dig deeper into deals, managing analyses, coordinating due diligence, and supporting negotiations.
Vice President (VP): VPs lead deal execution — managing associates, interfacing with company executives, and steering transactions through to completion.
Principal: Principals are senior investors responsible for sourcing deals, leading negotiations, and managing relationships — often on track to become partners.
Partner: Partners are firm leaders who drive investment strategy, oversee portfolios, and make final decisions on deals.
Managing Director (MD): The most senior role, often synonymous with Partner in many firms. MDs set direction, lead fundraising, and represent the firm at the highest levels.
How Does M&A Work?
How does M&A, and when I say M&A, I'm referring to private equity investment banking, also corporate development. How does it work?
Let's start by understanding the two different sides of this picture.
The Buy Side
The buy side refers to anyone who is buying a company. That can be two different groups of firms:
- The investor, otherwise known as the financial sponsor. This can be a private equity firm, a growth equity firm, or a VC. It's the party making the investment for financial reasons. They buy companies to generate a financial return.
- The corporate development team. This group sits within a large corporation that's acquiring companies for strategic reasons. For example, the firm might want to acquire a new technology, enter a new market, or expand its product offerings.
Maybe you want to acquire a new technology or enter a new market or get some talent OR break into a new product line you've never provided before. That's what corp dev does.
The Sell Side
The sell side, on the other hand, refers to the private company that’s up for sale. Executives from the selling company typically work with an investment bank or an M&A advisor to help broker the deal with a buyer.
Breaking Down the Buy Side
Investor Strategies
Each buy-side firm has its own investment strategy, risk tolerance, and time frame.
The graph below illustrates company size (x-axis) and how much information that investors can uncover in due diligence (y-axis).
Search funds are small (think: as few as one person) private equity firms focused on acquiring a single small to medium-sized business.
PE firms buy controlling stakes in established bootstrapped, middle-market companies. Often, their goal is to improve the target company’s performance and sell it for a profit within a few years.
VCs invest in early-stage startups with high growth potential. They take minority stakes and provide funding to help these young companies scale. Some also provide
Think of growth equity as a hybrid of PE and VC. These firms focus on more mature businesses, known as “scale-ups,” that are expanding and need funding to support that growth.
Hedge funds and asset managers typically focus on public markets. Note that some hedge funds also participate in M&A transactions by buying stakes in public companies to influence strategic moves like spin-offs or sales.
Org Structure
While these firms invest in different parts of the company life cycle, they share a significant amount of overlap in terms of structure.
Most roles for M&A professionals with 0-4 years of experience sit within the business development or investment teams:
- The business development (BD) team is responsible for sourcing. BD team members are the ones who search for investment targets that align with their firm’s strategy.
- The investment team owns the due diligence and deal execution processes. They also conduct some relationship-based sourcing.
Larger funds also have a portfolio operations team, which is responsible for value creation. Think of this team as consultants who help port cos become better companies.
Firms also have Operations teams, which include HR and Finance functions, to take care of logistical and operational support.
Incentive Structure
So how do these firms actually make money? Here’s how the key players work together.
Limited partners (LPs) are the investors who provide the capital for a PE fund. LPs can include high net worth individuals, pension funds, family offices, endowments, or sovereign wealth funds. Their goal is to earn high returns over the life of the fund.
General partners (GPs) manage the PE fund and use the LPs’ capital to acquire companies. They charge management fees — usually around 2% of assets under management — to cover operating costs, employee salaries, etc.
The businesses that a PE firm acquires are known as portfolio companies, or port cos. The PE firm’s goal is to make the port cos more valuable and ultimately generate returns. The returns are split: 80% goes to the LPs while GPs retain 20% of the profit, which is known as “carry” or “carried interest.” Many PE firms earn the bulk of their income on carried interest, which is directly tied to performance. This structure ensures that the PE firm’s goals and successes are directly aligned with those of their investors.
When executed correctly, this system generates wins for everyone involved:
- LPs earn attractive returns.
- The PE firm generates carried interest and builds a strong track record, which helps it raise more funds in the future.
- Portfolio company executives benefit from their company’s improved performance.
Breaking Down the Sell Side
Now let’s dig into the sell side. Firms operating on this side of the equation help companies raise capital, prepare for acquisitions, and navigate the process of selling their business.
Org Structure and Services
Most investment banks and advisory firms break their teams into coverage groups and product groups:
- Coverage groups focus on advising companies in specific industries, such as healthcare or industrials.
- Product groups focus on specific transaction types, which can occur across industries. These include:
- M&A: Advising clients on buying, selling, or merging businesses
- Restructuring: Advising companies facing financial distress
- Equity capital markets (ECM): Helping companies raise money through IPOs or stock offerings
- Debt capital markets (DCM): Helping companies raise funds through loans or bonds
Incentive Structure
On the sell side, incentives revolve around deal flow and transaction success. Unlike the buy side, where returns are earned over years, sell-side rewards are tied to completing deals efficiently and profitably.
Investment banks and advisory firms earn fees for completed transactions. These are often a percentage of the deal’s value, known as a success fee.
Firms may also charge retainer fees for ongoing advisory work. The more deals a firm closes — and the bigger those deals are — the higher the firm’s revenue.
Getting the Job
The best way to lay the foundation for a career in M&A is to land an internship in the industry and learn as much as you possibly can. Then, when you go to interview for analyst or associate roles, you’ll have a strong knowledge base to pull from.
Here are some tips for getting the most out of your internship and bringing that knowledge into your interviews later on.
Making the Most Out of Your Internship
Excelling at your internship isn’t just about learning to build financial models. Don’t get us wrong — financial models are certainly part of it. But succeeding at your internship requires a holistic approach.
Here are the six most important things that the majority of interns overlook:
- Set up coffee chats. Do this with everyone — your managers, your peers, partners at the firm, industry experts, etc. Everyone has something to teach you, and everyone has something to learn from you.
- Take on extra projects, especially ones from partners/MDs. These tasks may seem like busy work, but raising your hand here is often the best way to learn what’s on the partners' minds.
- Go to the events. You learn the most off the job and when you aren’t in the office.
- Learn about other parts of the business. It’s important to have a holistic understanding of the firm and the industry. It’s also a great way to build your network. Plus, you never know where you’ll end up.
- Ask good questions. If you’re lost in jargon, that’s ok. Ask a lot of questions. Then be a good listener so you don’t ask the same one twice.
- Cultivate your communication skills. Sending a cold email? You have to be able to articulate why the exec should read your message at all, what you bring to the table, and what you’re asking for in a clear, concise way. Pitching a target to your team? You need to make them understand why you think it’s a smart move. But communication isn’t just about the “why,” it’s also about the “how.” Other people need to understand how you arrived at your idea or hypothesis or conclusion.
Nailing the Interview: How to Differentiate Yourself from Other Analyst Candidates
Now, how do you actually land the analyst job? There are two components to each interview: technical and behavioral.
Technical
The technical portion assesses your understanding of the financial fundamentals that underpin the job. Because it's essentially a “check the box” exercise, it’s difficult to differentiate yourself in this portion — but you have to get it right to move forward.
You need to demonstrate that you can think like an analyst. That means demonstrating a strong understanding of:
- Valuation Methods: Be prepared to discuss discounted cash flow (DCF), comparable company analysis, and precedent transactions. Interviewers may ask you to explain how each method works and when you would use it.
- Financial Statements: Know how the income statement, balance sheet, and cash flow statement connect.
- Case Studies & Structured Thinking: Understand how to evaluate whether a deal aligns with a firm’s investment thesis and how it would add value.
- Modeling and Math: Expect quick mental math and Excel-based logic questions. You might be asked to estimate enterprise value from a set of financial metrics or to describe how you would build a simple LBO model.
- Market Awareness: Be able to discuss recent deals or market trends, especially in the industry that interests you. Show that you’re curious about and invested in the broader deal landscape.
Pro Tip: Don’t just memorize these concepts — make the effort to really understand them. That way, you’ll be able to explain them in your own words. Clarity is just as important as technical prowess.
Behavioral
Your opportunity to stand out from other candidates comes in the behavioral portion of the interview. Here’s how to do that.
- Remember that your introduction is your first chance to pitch yourself. Show that you understand the work, that you’re motivated to excel at it, and that you’re eager to learn.
- Put yourself in the interviewer’s shoes. Understand the qualities that are important for each specific team. Incorporate these into your answers.
- Investment Banking: Can you handle the hours? Are you committed to the job despite the long days?
- Consulting: Are you a structured thinker who will show well in front of clients?
- PE: Are you personable enough to source deals? Will founders like you?
- Use the STAR method to structure your answers. When you’re explaining your experiences, talk about the situation, task, action, and result. Focus on examples that show your problem-solving skills, initiative, and adaptability.
- Don’t pass up the opportunity to ask questions. Behavioral interviews almost always end with the interviewers asking, “Do you have any questions for us?” Be sure to have a few thoughtful, specific questions at the ready. Some topics you might want to ask about include the firm’s deal activity, training programs, or team structure.
Succeeding at the Job: Analyst Fundamentals
So let’s say you’ve landed the job. Congratulations! Now the real work begins. The role of the analyst is centered around analyzing data and thinking strategically about where deals come from and why they work.
The Deal Funnel
As an analyst, you need to have a deep understanding of the deal funnel. This is how an idea becomes an actual closed transaction.
First, firms conduct market mapping. This is where they assess how many and what kinds of companies fit the firm’s investment thesis and compile a list of potential targets. Members of the BD team reach out to executives at those companies to schedule meetings to kick things off.
After any necessary follow-ups, the firm submits an indication of interest (IOI). This is a formal notice that the firm is interested in acquiring the company. Next comes the letter of intent (LOI), which outlines the terms of the offer, including a valuation range.
Then the due diligence process begins. This is where the team dives deep into the target company’s financials, operations, strategy, competitive standing, growth potential, legal and regulatory compliance — everything. Once everything is aligned, the deal can close and integration can begin.
Additional Reading:
Deal Sourcing
Analysts support the deal sourcing process in several key ways:
- Market Mapping: Identifying and categorizing companies in a given sector, often using platforms like Grata, industry reports, and public filings.
- Target Screening: Evaluating potential acquisition or investment targets based on size, financial performance, and strategic fit. Analysts often create shortlists with high-level valuation metrics and deal rationales.
- Tracking Pipeline Activity: Maintaining internal files that record deal progress so that the team can see where opportunities stand at any given time.
- Outreach: Sending emails to executives and assembling relevant materials for initial meetings.
The best analysts don't just crunch numbers. They understand why a company might be an attractive target, what risks it presents, and how it fits into the firm’s overall strategy.
Thematic Sourcing
Thematic sourcing starts with an idea rather than a target list. Deal teams look for patterns in market behavior, such as emerging technologies, regulatory changes, or evolving consumer habits, and analyze what industries or business models will benefit from the shifts.
Once a theme is identified, analysts map the ecosystem, identifying the companies driving or benefiting from the trend. For example, if your team believes that the outsourced healthcare services sector is poised for consolidation, you would research specialized clinics, diagnostic providers, and staffing platforms to find acquisition targets.
Outreach Do’s and Don’ts
BD analysts have to write a lot of cold emails. Here’s what you’ll need to compose emails to executives that not only get opened, but get responses:
- An attention-grabbing subject line. Keep your subject line focused on the value your email is providing or the call to action. Are you able to introduce them to the CEO of one of your port cos? Lead with that. Are you looking for a meeting? Lead with that. Don't make the CEO guess the intention of your email.
- An engaging opener. To capture the executive's attention, your opener should be direct, engaging, and purposeful. Avoid meaningless phrases and focus on these approaches:
- Trigger-based Opener: Connect a recent development in the company to the potential for M&A opportunities. For example, acknowledge their recent funding round and express interest in their future rounds.
- Commonality Opener: Do some digging to find shared experiences or connections that can create an immediate bond.
- Credibility Opener: Showcase your firm's authority and expertise in the industry. Highlight past transactions and market research.
- A clear, concise ask. Keep your ask short and make it easy for the CEO to respond. Avoid making them search for the call to action (CTA).
Avoid these common mistakes that BD analysts make:
- Don’t make your message too long. Executives’ time is short. Keep things concise.
- Don’t be overly formal. Remove words like “Dear Mr./Ms./Mrs.” This kind of language is outdated. Strike a courteous, but casual tone.
- Don’t focus on yourself too much. Keep an eye out for overuse of “I,” “me,” and “my.” The message is about the CEO, not you.
Additional Reading
Diligence, Modeling, & Technical Skills
Analysts also play a key role in the diligence process:
- Financial Diligence: Analysts review financial statements, revenue breakdowns, margins, and cash flow patterns to help reconcile numbers and identify anomalies that could affect valuation.
- Operational Diligence: In this phase, analysts gain an understanding of how the business actually runs, including its supply chains, staffing, production capacity, or customer concentration. Analysts may also tap in to provide support on calls or data analysis.
- Market and Strategic Diligence: Analysts assist with evaluating the target company’s competitive positioning, growth prospects, and potential synergies with the acquirer’s portfolio.
- Legal and Regulatory Diligence: While attorneys handle the details, analysts often help compile or summarize findings from contracts, compliance documents, and other key records.
The diligence phase also includes a heavy amount of financial modeling. Here are the most common model types you need to know as an analyst:
- Discounted Cash Flow (DCF): Projects a company’s future cash flows to estimate its present value. Analysts should know how to build assumptions for revenue growth, margins, working capital, and capital expenditures.
- Comparable Company (Comps) Analysis: Compares target companies to similar public firms using multiples like EV/EBITDA, P/E, or revenue multiples.
- Precedent Transactions: Analyzes historical M&A deals in the same industry to benchmark valuation ranges.
- Merger Models (M&A Accretion/Dilution): Evaluates the financial impact of a potential acquisition on the acquirer’s earnings per share.
Comps Analysis
One of the most important skills for an M&A analyst is knowing how to value private companies. This process begins with analyzing companies that are comparable to your firm’s target, aka “comps.” Comps help deal teams determine what a company might be worth based on how similar businesses are performing.
Here are the different kinds of comps analysis you need to know.
M&A Comps (aka Precedent Transactions)
M&A comps, or precedent transactions, look at past deals involving similar companies to estimate what a business might sell for today. These are especially important for the sell side, as they help set expectations for valuation.
For this kind of analysis, analysts focus on:
- Transaction value
- Revenue and EBITDA multiples at the time of acquisition
- Deal structure (cash, stock, or mix)
- Market conditions when the deal occurred
- Strategic rationale
Public Comps
Public comps analysis compares the target company to a set of publicly traded firms in the same industry. This helps the deal team understand how similar businesses are valued in the current market.
For public comps analysis, analysts gather data from financial statements, investor presentations, and stock market metrics such as:
- Enterprise Value / EBITDA
- Price / Earnings (P/E)
- Enterprise Value / Revenue
Private comps
Private comps analysis uses valuation multiples from similar companies in the private market. These can be sourced from holistic dealmaking platforms like Grata, industry reports, or firm deal history.
Private comps are especially useful for evaluating mid-market and lower-middle-market deals, where private companies dominate. Analysts use them to fill the gap between precedent transactions and public comps, ensuring valuations are realistic for the target industry.
Market fragmentation
Analysts conduct market fragmentation analysis to understand the competitive landscape and structure of the target industry. They assess market opportunity using:
- The number of competitors and their market share distribution
- Barriers to entry and industry growth rates
- Consolidation trends and historical deal activity
A fragmented market is one in which many small players compete. Fragmented spaces often present attractive M&A opportunities, especially for buy-side firms pursuing roll-up strategies.
Other Technical Skills
Other key technical skills that analysts should master include:
- Excel: Dynamic modeling and analyses
- Slide Decks and Presentations: Crafting clear, concise pitch books and client-facing materials
- Financial Statement Analysis: Understanding income statements, balance sheets, and cash flow statements to identify drivers of value
Additional Reading:
Career Trajectory
The analyst role sets the foundation for advancement in M&A. Understanding the typical path will help you prioritize learning and career development opportunities.
- Analyst (0–3 years): Focused on modeling, due diligence, and preparing client materials. Learning from senior team members and mastering technical skills is critical.
- Associate (3–5 years): Starts to manage analysts, contribute to client interactions, and play a bigger role in deal execution. Often recruited internally or from MBA programs.
- Vice President/Director (5–8 years): Leads deals, manages client relationships, and oversees multiple deals simultaneously.
- Managing Director/Partner (8+ years): Sources deals, maintains senior client relationships, and makes strategic decisions for the firm.
Analysts who show initiative, strong analytical skills, and business judgment are often given early exposure to client meetings, deal strategy sessions, and more — all of which can help accelerate their path to associate and beyond.
Additional Reading
- Business Valuation Multiples: A Comprehensive Guide
Jumpstart Your M&A Career with Grata Scholars
If you’re an undergraduate interested in pursuing a career in M&A, the Grata Scholars program can give you a serious edge.
The five-week program takes place twice a year, once in the fall and once in the spring. Over the course of each semester, Grata Scholars boost their resumes with industry-specific skills and knowledge. This includes learning to navigate the Grata platform like a pro. Scholars also compete for an opportunity to work with a private equity firm, investment bank, or corporate development team focused on M&A.
Learn more about the program and submit your application here.
