Would you still recommend Bid B after the revision?
Update your recommendation and name one fact that would change it.
The question
Bid A still offers $108m cash with 95% closing probability. Bid B still offers $90m cash, 2m buyer shares and a $12m earnout with 50% chance given close. Its buyer share price falls from $10 to $8 and its assumed closing probability falls from 75% to 65%. The fallback is $80m.
“Update your recommendation and name one fact that would change it.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Choose your approach
What would you do here? Open the move you’d make.
Stay with B because the earnout cap did not change.
Tempting, but it misses something. The stock value and chance of closing fell. The unchanged earnout does not offset those changes.
Recommend A and explain how the lower share price and closing chance affect B.
The strong move. The recommendation states a decision, its basis, and a threshold for new evidence.
See how a strong candidate says it
“A stays at $106.60m. B falls to $100.80m, so A leads by $5.80m. At $8 per buyer share, B needs about 83.13% closing probability to tie.”
Why it works: The recommendation states a decision, its basis, and a threshold for new evidence.
Step 2: Mark the revised stock
What would you do here? Open the move you’d make.
Reprice the buyer shares.
The strong move. At $8 a share, the stock is worth $16m. Expected proceeds given close fall to $112m.
Reprice the cash payment as well.
Tempting, but it misses something. Only the share price changed within the consideration.
See how a strong candidate says it
“At $8 a share, the stock is worth $16m. Expected proceeds given close fall to $112m.”
Why it works: Only the share price changed within the consideration.
Step 3: Apply the revised closing chance
What would you do here? Open the move you’d make.
Update the probability blend using 65% for B.
The strong move. B now gives $80m plus 65% of $32m, or $100.80m. A stays at $106.60m.
Use B’s original 75% chance.
Tempting, but it misses something. The case gives a revised estimate of the chance of closing.
See how a strong candidate says it
“B now gives $80m plus 65% of $32m, or $100.80m. A stays at $106.60m.”
Why it works: The case gives a revised estimate of the chance of closing.
Step 4: Name a decision threshold
What would you do here? Open the move you’d make.
Give a recommendation and a threshold for reconsidering it.
The strong move. Recommend A. At an $8 share price, B needs about 83.13% closing probability to tie.
Say that B will never be worth another look.
Tempting, but it misses something. Stronger evidence about the closing chance could change the decision.
See how a strong candidate says it
“Recommend A. At an $8 share price, B needs about 83.13% closing probability to tie.”
Why it works: Stronger evidence about the closing chance could change the decision.
The answer, in short
- Decision
- A stays at $106.60m. B falls to $100.80m, so A leads by $5.80m. At $8 per buyer share, B needs about 83.13% closing probability to tie.
- Because
- The recommendation states a decision, its basis, and a threshold for new evidence.
- What would change it
- Evidence that B can close with a probability above 83.125%, with the other assumptions unchanged, would put it ahead.
Common traps
- Stay with B because the earnout cap did not change.
Check your answer
- Did I state which values and assumptions I used?
- Mark the revised stock?
- Apply the revised closing chance?
- Name a decision threshold?
Last reviewed Nov 10, 2026