Q&A Hero

Q: In many instances, growth through acquisition is _________ than building a new business from scratch. A. Cheaper B. More time consuming C. Faster D. Both A and C

Q: For day-to-day execution in an M&A process, appointed member(s) of the investment banking advisory team communicate(s) with: A. A point person B. The CEO C. Investor relations D. The CFO

Q: All of the following are reasons why M&A activity tends increase in strong economic times EXCEPT: A. High management confidence B. Financing is readily available C. Companies have excess cash D. Companies focus on fortifying their balance sheets

Q: All of the following are valuation methodologies used by financial sponsors EXCEPT: A. LBO model B. Precedent transitions analysis C. Comparable companies analysis D. Accretion/(dilution) analysis

Q: Where is a data room typically set up? A. In the target company's headquarters B. Online C. In Switzerland D. In M&A advisors headquarters

Q: All of the following are advantages of a negotiated sale EXCEPT: A. High degree of confidentiality B. Fastest timing C. Less disruptive to the business D. Potential to leave money on the table

Q: A(n) __________ is often initiated by the buyer. A. Asset sale B. Negotiated sale C. Targeted auction D. Broad auction

Q: In which type of sale process does a seller have the least leverage? A. Negotiated sale B. Stock sale C. Targeted auction D. Broad auction

Q: What happens in a two-step tender process if the buyer fails to acquire enough of the targets shares within 20 business days? A. The merger is busted B. The buyer gets additional time C. A shareholders meeting must be completed D. None of the above

Q: In an M&A transaction, when is a tender offer made to the public shareholders? A. Stock sale B. One-step transaction C. Two-step tender process D. Asset sale

Q: Who decides to approve or reject a transaction in a one-step merger transaction for a public company? A. CEO B. Board of directors C. Target shareholders D. CFO

Q: Which act requires that both parties in a large M&A transaction file notifications and report forms to the FTC and the DOJ? A. Jones Act B. Glass-Steagall Act C. Sarbanes-Oxley Act D. Hart-Scott-Rodino Act

Q: The targets board of directors typically requires __________ before making a recommendation on whether to accept the offer and approve the execution of a definitive agreement. A. Additional due diligence B. A fairness opinion C. A sum of the parts analysis D. All of the above

Q: In a(n) __________, the target survives the transaction and may choose to either continue operations or dissolve after distributing the proceeds from the sale to its equity holders. A. Asset sale B. Stock sale C. Fire sale D. None of the above

Q: When is an issues list used in the M&A sale process? A. After the potential buyer submits the revised definitive agreement B. Before the seller send the revised definitive agreement C. If the buyer does not want to submit a revised definitive agreement before it is informed it won the auction D. At the beginning of the M&A sale process

Q: Which document has the purchase price details as well as the exact date and guidelines for an M&A process? A. CIM B. Bid procedures letter C. Confidentiality agreement D. Final bid procedures letter

Q: Which of the following buyers could potentially have limited access to the data room? A. Direct competitor B. Strategic buyer C. Financial sponsor D. All have equal access

Q: Which of the buyers can limit the scope of their due diligence? A. Financial sponsor B. Strategic buyer C. Direct competitor D. They are all equal

Q: Stapled financing is a(n): A. Optimal financing structure B. Customized financing structure C. Pre-packaged financing structure D. None of the above

Q: A comprehensive set of information relevant to buyers can be found where? A. Data room B. CIM C. Teaser D. Confidentiality agreement

Q: Key conditions to signing and closing are found on which of the following documents? A. CIM B. Bid procedure letter C. Teaser D. Confidentiality agreement

Q: Which of the following should be one of the first documents presented to a potential buyer? A. Confidentiality agreement B. Teaser C. Bid procedures letter D. None of the above

Q: What marks the formal launch of the bidding process? A. Drafting the CIM B. The confidentiality agreement C. Contacting prospective buyers D. Receiving initial bids

Q: The confidentiality agreement includes provisions for all of the following EXCEPT: A. Restrictions on financing B. Standstill agreement C. Permitted disclosure D. Restrictions on clubbing

Q: In the M&A sales process, projected financial information can be found in which document? A. 10-K B. 8-K C. CIM D. 424B3

Q: The teaser and CIM are both part of the: A. Financial exhibits B. Marketing materials C. Confidentiality agreement D. Contract

Q: Which of the following may be an advantage of a pursuing a strategic buyer in the M&A process? A. Less financing risk B. Operating leverage C. Ability to realize synergies D. Both A and C

Q: Which of the following criteria should be considered when evaluating a potential financial sponsor buyer? A. Investment strategy B. Fund size C. Synergies D. Both A and B

Q: When evaluating strategic buyers, which of the following should be taken into consideration? A. Financial capacity B. Sector expertise C. Investment strategy D. Both A and B

Q: Which of the following is performed during the final stage of the auction process? A. Select winning bidder B. Distribute final bid procedures letter and draft definitive agreement C. Financing D. Contact prospective buyers

Q: Which of the following is performed during the first stage of the auction process? A. Prepare confidentiality agreement B. Contact prospective buyers C. Receive board approval D. Conduct management presentation

Q: All of the following are advantages of which auction type? Heightens competitive dynamics Limits potential buyers negotiating leverage Reduces potential business disruption A. Broad auction B. Targeted auction C. Negotiated sale D. None of the above

Q: All of the following are disadvantages of which auction type? Potential to leave money on the table May afford buyers more leverage in negotiations Lesser degree of competition A. Broad auction B. Targeted auction C. Negotiated sale D. Silent auction

Q: When performing a returns analysis in an LBO, which method does not include the time value of money? A. IRR B. DCF C. Cash return analysis D. Perpetuity growth method

Q: What is the annual interest rate paid on a debt obligations principal amount outstanding called? A. Covenant B. Coupon C. Call premium D. PIK

Q: What is the classification of a covenant that requires to buyer to maintain a minimum EBITDA? A. Affirmative B. Negative C. Maintenance D. Financial

Q: What is the classification of a covenant that limits the amount of debt the borrower can have outstanding? A. Affirmative B. Negative C. Maintenance D. Financial

Q: What is the classification of a covenant requiring a borrower to maintain assets, collateral, or other securities? A. Affirmative B. Negative C. Maintenance D. Financial

Q: All of the following are primary classifications of covenants EXCEPT: A. Affirmative B. Negative C. Maintenance D. Financial

Q: What can protect investors from having debt with an attractive yield refinanced before maturity? A. Floating interest rate B. Fixed interest rate C. PIK D. Call premium

Q: What kind of loan is needed if the take-out securities deteriorate between the signing and the closing of an LBO? A. Bridge loan B. Second lien term loan C. PIK D. Mezzanine debt

Q: A feature in the high yield market that allows the issuer to pay interest in the form of additional notes is called a: A. Bridge loan B. First lien C. PIK D. Term B loan

Q: An ABL facility is generally secured by a first priority lien on which of the following assets? A. PP&E B. Deferred tax asset C. Inventory D. Goodwill

Q: Which of the following forms of financing tends to be the least flexible? A. Bank debt B. Mezzanine debt C. Equity contribution D. High yield bonds

Q: Calculate the terminal value using the EMM method given the following information. A. 8,400.0m B. 8.160.0m C. 8,000.0m D. 8,480.0m

Q: Identify the following formula.A. CAPMB. DCFC. PGMD. EEM

Q: Calculate the unlevered beta given the following information.A. 1.8B. 1.2C. 1D. 1.4

Q: Calculate the CAPM given the following information.A. 12%B. 16%C. 20%D. 8.32%

Q: Calculate the market risk premium given the following information. A. 13% B. 6% C. 7% D. 20%

Q: What is used to calculate the expected return on a companys equity? A. FCF B. CAPM C. DCM D. EEM

Q: What happens to WAAC as the proportion of debt in a capital structure increases? A. It stays the same B. It decreases C. It increases D. It depends

Q: When there is no debt in the capital structure, what is WAAC equal to? A. Cost of debt B. Debt-to-total capitalization ratio C. Equity-to-total capitalization ratio D. Cost of equity

Q: Calculate the ratio of debt-to-total capitalization given the following information. A. 3% B. 2.7% C. 1.5% D. 2%

Q: What is inventory divided by to obtain DIH? A. COGS B. Sales C. Accounts Receivable D. Gross Profit

Q: Calculate the DSO of a company given the following information. A. 0.02 B. 0.06 C. 21.9 D. 7.3

Q: How does a decrease net working capital affect FCF? A. Overstates FCF B. Does not affect FCF C. Understates FCF D. It depends

Q: Which of the following is considered a use of cash? A. Amortization B. Depreciation C. Decrease in net working capital D. Increase in net working capital

Q: Capex is expensed over its useful life through which of the following? A. Depreciation B. Amortization C. EBIAT D. Goodwill

Q: Which expense reduces the life of an intangible asset? A. Depreciation B. Accelerated Depreciation C. Amortization D. Capex

Q: Calculate the companys free cash flow given the following information. A. $250.0mm B. $340.0mm C. $500.0mm D. $300.0mm

Q: In a DCF analysis, the targets projected FCF and terminal value are discounted to the present and summed to calculate the targets: A. Enterprise value B. Market cap C. Equity value D. Current value

Q: In which calculation is the exit multiple method or the perpetuity growth method used? A. Present value B. Terminal value C. WACC D. FCF

Q: In a DCF analysis, what is used to capture the remaining value of the target beyond the projection period? A. Intrinsic value B. Terminal Value C. WACC D. Enterprise Value

Q: When there are limited (or no) pure play peer companies, which valuation method should be used? A. Comparable companies analysis B. Precedent transaction analysis C. Vertical analysis D. Discounted cash flow analysis

Q: A DCF analysis is premised on the principle that the value of a company can be derived from the present value of which of the following? A. Revenues B. Gross profits C. Free cash flow D. Net working capital

Q: In which document can one find recommendation from the targets board of directors on how shareholders should respond to a tender offer? A. 8-K B. Schedule 13E-3 C. 10-Q D. Schedule 14D-9

Q: Calculate the percentage of premium paid given the following details: Details: Although rumors of the transaction leaked out yesterday, AcquirerCo officially announced today that it has agreed to buy TargetCo for $25.00 a share. TargetCo shares closed higher yesterday at $20.00. A. 25% B. 20% C. 15% D. Not enough information

Q: Calculate the offer price per share given the following details: Transaction Details: AcquirerCo agreed to buy TargetCo with a mix of cash and AcquirerCo stock. TargetCo stockholders will receive $5.00 in cash and one share of AcquirerCo common stock for every two shares of TargetCo stock. AcquirerCos share price closed at $30.00 a day prior to the announcement. A. $15.00 B. $35.00 C. $25.00 D. $20.00

Q: Which structure generally gives greater certainty to the targets shareholders in terms of value received? A. Floating exchange ratio B. Fixed exchange ratio C. They both are the same D. It depends on the terms

Q: Determine the type of exchange ratio in the following Stock-for-Stock transaction. Transaction Details: AcquirerCo will acquire TargetCo for stock. TargetCo stockholders will receive $40.00 of AcquirerCos common stock for each share of TargetCo common stock they hold. A. Fixed exchange ratio B. Secure exchange ratio C. Floating exchange ratio D. Linear exchange ratio

Q: Calculate the equity value in a fixed exchange ratio structure given the following information. Transaction Details: TargetCos shareholders will receive one share of AcquirerCos common stock for every four shares of TargetCos common stock. AcquirerCos share price prior to the announcement was $20.00. TargetCo has 25 million shares outstanding. A. $125.0mm B. $100.0mm C. $80.0mm D. $50.0mm

Q: Calculate the fixed exchange ratio based on the following transaction details. Transaction Details: AcquirerCo agrees to purchase TargetCo in an all-stock transaction valued at $2.0 billion. TargetCos shareholders will receive one share of AcquirerCos stock for every four shares of TargetCo stock they own. A. 4 B. .25 C. 1.00 D. .5

Q: A ratio that defines how many shares of the acquirers stock are exchanged for each share of the targets stock is referred to as a: A. Fixed exchange ratio B. Secure exchange ratio C. Floating exchange ratio D. Stock-for-stock ratio

Q: Which form of consideration typically triggers a taxable event? A. All-cash B. Stock-for-Stock C. Cash/stock mix D. None

Q: Which of the following choices is NOT a primary type of purchase consideration for a targets equity? A. All-cash B. Stock-for-Stock C. Cash/stock mix D. All-debt

Q: Calculate the offer price per share for a company in an all-cash transaction given the following information. Transaction Details: Cash offer price: $300.00mm Shares outstanding: 5.00mm Current share price $30.00 A. $60.00 B. $10.00 C. $6.00 D. $30.00

Q: How is the equity value calculated for an M&A transaction when the target company is private? A. Share price multiplied by shares outstanding B. Acquirers price per share multiplied by shares outstanding C. Enterprise value less assumed/refinanced net debt D. There is no equity value for a private company

Q: Calculate the equity value for a public target in a precedent transactions analysis given the following information. Details: Share price: $20.00 Acquirers offer price per share: $40.00 Fully diluted shares outstanding: 100.00mm A. $200.00mm B. $400.00mm C. $150.00mm D. $250.00mm

Q: When may a Schedule 13E-3 be issued? A. In a tender offer B. In a one-step merger transaction C. When a public acquirer issues shares as part of the purchase consideration of a public target D. In a leveraged buyout of a public company

Q: What situation would generally result in a lower purchase price of a company? A. The seller is in need of cash and is selling a non-core business B. The target company is shopped to prospective buyers through an auction C. The target company is seeking alternatives to a hostile bid D. The buyer seeks to create synergies