CPFM Mergers and Acquisitions Finance

Question 1

In an M&A transaction, which term describes the premium paid over the target company's pre-announcement market price?

Accepted Answer

Control premium

Answer

Enterprise value

Answer

Terminal value

Answer

Minority discount

Question 2

Which type of merger involves two companies in the same industry and at the same stage of production?

Accepted Answer

Horizontal merger

Answer

Vertical merger

Answer

Conglomerate merger

Answer

Reverse merger

Question 3

The due diligence process in M&A is conducted primarily to:

Accepted Answer

Identify risks and validate the target's financial information

Answer

Market the deal to shareholders

Answer

Negotiate employee benefits

Answer

Establish post-merger branding

Question 4

In a stock-for-stock acquisition, the acquirer pays for the target by:

Accepted Answer

Issuing new shares of its own stock to target shareholders

Answer

Paying cash from reserves

Answer

Assuming the target's debt only

Answer

Converting bonds to equity

Question 5

Which concept represents the additional value created when two companies combine that neither could achieve independently?

Accepted Answer

Synergy

Answer

Goodwill amortization

Answer

Dilution

Answer

Accretion

Question 6

A leveraged buyout (LBO) is characterized by the use of:

Accepted Answer

Significant debt financing secured by the target's assets and cash flows

Answer

Primarily equity financing to acquire a target

Answer

Government grants and subsidies

Answer

Convertible preferred stock only