How to Answer “What’s the difference between a tender offer and a merger?” in Investment Banking Interviews

Lead with a one-line contrast that answers the question immediately. A Tender Offer is an offer by an acquirer to purchase shares directly from the target’s shareholders, who choose individually whether to tender at the offered price. A Merger is a statutory combination executed via the target company, typically negotiated by the board and then approved through the required corporate process (often including a shareholder vote).

This opening sets up everything else: tender offers are “opt-in” at the shareholder level, while mergers are a single corporate transaction where, once approved and effective, all shares convert into the agreed consideration. In interview settings, this is the cleanest way to show you understand the mechanism, not just the terminology.

Next, explain the decision and approval path—this is the most tested mechanical difference. In a tender offer, the buyer usually sets conditions such as a minimum tender condition (enough shares tendered to obtain control). The target board can recommend for or against, but it cannot “approve” the tender the same way it approves a merger; shareholders decide one-by-one.

In a merger, the board typically negotiates and signs the merger agreement, then the transaction follows a formal approval process under corporate law and securities rules—commonly including a shareholder vote at a meeting. Once the merger closes, shareholders are cashed out or receive stock per the agreement, including those who didn’t actively choose to sell.

Wrap this step with the implication: tender offers can succeed without a traditional shareholder meeting vote, while mergers rely on that corporate approval path.

Give a practical tender offer explanation focused on speed and certainty. Tender offers can often be launched quickly once documentation and financing are ready, because the buyer is soliciting tenders directly rather than waiting for a meeting and vote process. That said, tender offers carry specific execution risks: not reaching the minimum tender threshold, shareholders holding out, competing bids, and conditions such as regulatory approvals.

Mergers can take longer due to the need to prepare and file proxy/registration materials, run a formal solicitation process, and schedule the vote. However, in a friendly negotiated merger with board support, the path can feel more “defined” once the agreement is signed (subject to standard closing conditions).

In interviews, anchor your comparison on why timing differs (process steps), not just “tender is faster / merger is slower.”

To show deal awareness (and to stand out in investment banking interview strategies), add one nuance: many public takeovers are structured as a two-step transaction. The buyer does a front-end tender offer to gain control quickly, then completes a back-end merger to acquire the remaining shares and reach 100% ownership.

This also ties to the “what happens to non-tendering shareholders” point. In a pure tender offer, you may end up with control but not necessarily full ownership unless you follow with a second step (subject to law and thresholds). In a merger, by contrast, the transaction typically results in all shares converting at closing.

Finish by stating the decision rule: structure choice depends on speed, willingness of the board to engage, and the cleanest path to full ownership given conditions and approvals.