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

The control premium is the amount above the market price that an acquirer pays to gain controlling interest in the target company.

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

A horizontal merger combines two companies that are direct competitors at the same level of the supply chain.

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

Due diligence involves a thorough investigation of the target's financials, operations, legal matters, and risks to validate the deal.

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

In a stock-for-stock deal, the acquirer exchanges its own newly issued shares for shares of the target company.

Question 5

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

Accepted Answer

Synergy

Answer

Synergy is the value created through combination — including cost savings, revenue enhancements, and operational improvements — beyond standalone values.

CPFM Practice Test

CPFM Practice Test

CPFM Mergers and Acquisitions Finance