Mergers & Acquisitions Transactions Flashcards

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

Answer: 52-week trading range

The 52-week trading range represents the stock's historical market price and is often used as a reference floor showing where the company's shares have actually traded.

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

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

A go-shop provision permits the target company to actively canvas other potential buyers for a specified window (typically 30–50 days) after signing, providing a market check.

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

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

A reverse termination fee (reverse break-up fee) is paid by the acquirer to the target if the buyer fails to close the transaction, compensating the seller for lost time and opportunity.

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

Answer: Multiple expansion, earnings growth, and debt paydown

LBO returns are driven by the combination of EBITDA growth, debt amortization reducing leverage, and potential multiple expansion at exit.

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

Answer: 20 business days

SEC Rule 14e-1 requires that a tender offer be held open for a minimum of 20 business days, giving shareholders adequate time to make an informed decision.

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

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

In a triangular merger, the acquirer creates a subsidiary that merges with the target, so the parent company avoids directly assuming the target's liabilities or requiring its shareholder vote.