Series 79 – Investment Banking Representative Exam Mergers & Acquisitions Transactions 2

Question 1

Which valuation methodology is most commonly used as a 'floor' in M&A analysis because it reflects the minimum standalone value of a company?

Accepted Answer

52-week trading range

Answer

Discounted Cash Flow (DCF)

Answer

Precedent transactions analysis

Answer

Leveraged buyout (LBO) analysis

Question 2

A 'go-shop' provision in a merger agreement allows the target to:

Accepted Answer

Actively solicit competing bids for a defined period after the merger agreement is signed

Answer

Negotiate better financing terms with lenders post-signing

Answer

Delay closing if market conditions deteriorate

Answer

Repurchase shares before the deal closes

Question 3

What is the primary purpose of a 'reverse termination fee' in an M&A deal?

Accepted Answer

To compensate the seller if the buyer walks away from the transaction

Answer

To reimburse the buyer for due diligence costs if the seller terminates

Answer

To penalize the target for accepting a competing bid

Answer

To cover SEC filing fees if the deal is abandoned

Question 4

In a leveraged buyout (LBO), the primary source of equity returns typically comes from:

Accepted Answer

Multiple expansion, earnings growth, and debt paydown

Answer

Dividend recapitalizations only

Answer

Refinancing at lower interest rates

Answer

Selling non-core assets immediately after acquisition

Question 5

Under SEC Rule 14e-1, a tender offer must remain open for at least:

Accepted Answer

20 business days

Answer

10 business days

Answer

30 calendar days

Answer

5 business days

Question 6

What distinguishes a 'triangular merger' from a direct merger?

Accepted Answer

The acquirer uses a wholly owned subsidiary to merge with the target, shielding the parent from liabilities

Answer

It involves three separate acquirers pooling resources

Answer

It requires approval from three regulatory agencies

Answer

It is limited to cross-border transactions