Mergers and Acquisitions Finance Flashcards
6 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Mergers and Acquisitions Finance flashcards as text
In M&A valuation, a precedent transactions analysis establishes value by examining:
Answer: Multiples paid in similar historical M&A deals
Precedent transactions analysis uses valuation multiples from past comparable M&A deals to estimate a fair acquisition price.
Which M&A defense strategy involves the target company acquiring the acquirer's business or a significant stake in it?
Answer: Pac-Man defense
The Pac-Man defense occurs when the target turns the tables and attempts to acquire the hostile bidder.
An accretive acquisition means the deal will:
Answer: Increase the acquirer's earnings per share
An accretive deal increases the acquirer's EPS because the target's earnings contribution exceeds the dilution from new shares or financing costs.
Which financial metric is used in M&A to measure a target's ability to service acquisition debt?
Answer: EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the key proxy for cash flow available to service acquisition debt.
In purchase price allocation following an acquisition, any excess of purchase price over the fair value of net identifiable assets is recorded as:
Answer: Goodwill
Under ASC 805, goodwill is recognized as the excess of the acquisition price over the fair value of the identifiable net assets acquired.
A 'hostile takeover' differs from a 'friendly acquisition' primarily because:
Answer: The target's board opposes the acquisition
A hostile takeover proceeds without the approval or recommendation of the target company's board of directors.