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In the years before the 2008 credit crisis, private equity represented the following percent of merger and acquisition deals: - ANSWER 30%
In any given year, the volume of mergers and acquisitions is closely tied to: - ANSWER High stock prices and available debt financing - to assist buyers in...
M&A Professional Certificate Question
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In the years before the 2008 credit crisis, private equity represented the following percent of merger
and acquisition deals: - ANSWER 30%
In any given year, the volume of mergers and acquisitions is closely tied to: - ANSWER High stock
prices and available debt financing - to assist buyers in raising acquisition finance
What is a key constraint in emerging market Mergers and Acquisitions? - ANSWER Family business
involved in emerging markets
Why do China and many other emerging markets restrict Mergers and Acquisitions? - ANSWER
Governments worried about possible layoff from competitors combining and political unrest
A "cash flow" loan is: - ANSWER A loan that seeks repayment principally from future earnings since
the borrower lacks sufficient collateral
What percent of global Mergers and Acquisitions is emerging markets based? - ANSWER 15%
On a global basis, the merger and acquisition business is: - ANSWER A cyclical business
On a global basis, most acquisitions are smaller than US$100 million. - ANSWER True
Why does a management team want to grow a company? Select the one best answer. - ANSWER
Growth companies receive higher value multiples in the stock market
,Which growth tactic is more risky from an operational point-of-view? - ANSWER Growing a business
through new product development
There are two kinds of buyer synergies in a Mergers and Acquisitions deal. Which kind is the easiest
for the buyer to achieve? - ANSWER Cost synergy
The purpose of acquisitions is to increase the acquirer's: - ANSWER Common Stock Value
The publicly-traded stock of an acquiring company trades at 15x earnings per share (EPS), or a 15x
P/E ratio. During the year, the company buys four smaller (but similar) businesses at a 10x P/E ratio.
This practice of buying firms at a lower P/E ratio is called: - ANSWER Arbitrage
If Thai Petrochemical (Thailand) acquires a United States petrochemical firm at a reasonable price,
the P/E/ multiple of Thai Petrochemical might increase. Why? - ANSWER U.S. firms have less political
and currency risk than Thai companies. This means PTT stock is more attractive
Emerging markets (such as Thailand, China, and India) represent 80% of the world's population.
Approximately what percentage of the global Mergers and Acquisition activity do they represent? -
ANSWER 15%
Cost synergies are easy to obtain in American Mergers and Acquisition deals because: - ANSWER The
buyer can fire (or lay off) the employees of the acquisition with little penalty
In the United States, AT and T, the number 1 wireless phone company, wanted to buy T-Mobile, the
number 3 wireless phone company, for US$30 billion. That is an example of a: - ANSWER Horizontal
Merger
The primary risk for an acquirer in a Mergers and Acquisition deal is: - ANSWER Paying too much for
the acquisition
In the Mergers and Acquisitions business, what valuation method is considered the most useful? -
ANSWER In the Mergers and Acquisitions business, what valuation method is considered the most
useful?
, What is a common mistake in Mergers and Acquisitions projections? - ANSWER No economic
recessions
If a publicly-traded company in western Europe trades at 100 Euros per share, its acquisition value
should be: - ANSWER 130 per share (+30%)
What is true about Mergers and Acquisitions targets that lose money on an operating basis? -
ANSWER The acquisition prices might have a 40% discount from those of profitable targets
"Money losing" firms are frequent targets in the Mergers and Acquisition business. Why do acquirers
seek "money losers"? - ANSWER - Acquirers think they can "fix" the money losers' problems
- Money losers sell "at a discount" to value multiples of profitable firms
When you value an oil and gas exploration and development concern, what is the most important
ratio? - ANSWER Adjusted enterprise value/oil reserves
A common problem in the DCF valuation of high tech firms is using too-high discount rates. -
ANSWER False
Does a buyer need to use an investment bank for its search? - ANSWER No
If a buyer approaches 100 logical targets how many offers can it expect to make? - ANSWER 2
Why are Mergers and Acquisitions professionals reluctant to use discounted cash flow (DCF) in
valuation negotiations? - ANSWER Forecasts and discount rates are too subjective
A key problem with comparable public company multiples in valuation is: - ANSWER The
methodology tends to be backward-looking, when investors need to look forward
Which value technique usually receives the most weight in Mergers and Acquisitions negotiations? -
ANSWER Comparable Mergers and Acquisitions deals
Which of the following industries should have the highest cost of equity? - ANSWER Social media
firm
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