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 an M&A transaction, which term describes the premium paid over the target company's pre-announcement market price?
Answer: Control premium
The control premium is the amount above the market price that an acquirer pays to gain controlling interest in the target company.
Which type of merger involves two companies in the same industry and at the same stage of production?
Answer: Horizontal merger
A horizontal merger combines two companies that are direct competitors at the same level of the supply chain.
The due diligence process in M&A is conducted primarily to:
Answer: Identify risks and validate the target's financial information
Due diligence involves a thorough investigation of the target's financials, operations, legal matters, and risks to validate the deal.
In a stock-for-stock acquisition, the acquirer pays for the target by:
Answer: Issuing new shares of its own stock to target shareholders
In a stock-for-stock deal, the acquirer exchanges its own newly issued shares for shares of the target company.
Which concept represents the additional value created when two companies combine that neither could achieve independently?
Answer: Synergy
Synergy is the value created through combination — including cost savings, revenue enhancements, and operational improvements — beyond standalone values.
A leveraged buyout (LBO) is characterized by the use of:
Answer: Significant debt financing secured by the target's assets and cash flows
An LBO uses a large proportion of debt, often secured by the target's assets and cash flows, with equity providing a smaller portion.