Exam (elaborations)
VC Final Exam questions with 100% correct answers rated A+ passed
- Course
- Institution
VC Final Exam questions with 100% correct answers rated A+ passed
[Show more]
Content preview
VC Final Examreasons why companies get sold - correct answer ✔✔- founder dies or wants to cash out
- company is sold to settle an estate or a divorce
- largest shareholder wants to cash out
why would the largest shareholder want to cash out? - correct answer ✔✔- they believe that the future
is not good for the business
- the market is overvaluing the business
- they need cash for some other reason
steps in the process of selling a business - correct answer ✔✔1. company hires IB to sell the company
2. IB does due diligence - investigates the company and its financials to see if there are any problems ,
gathers info for the sale process
3. IN values the company
4. IB drafts an offering memorandum - book about the company that will be read by potential bidders
5. IB and company put together a list of potential buyers - length of list is driven by a tradeoff between
desire to maximize price (large number of bidders) vs. desire to maintain secrecy (smaller number of
bidders)
6. distribute the offering memorandum to the potential buyers - buyers must sign a confidentiality
agreement to receive it
7. collect expressions of interest from potential buyers - these are non-binding bids that provide the
buyers preliminary thoughts about price and terms, will contain many contingencies (which gives bidder
the ability to walk away)
8. select finalist companies - based on price, best terms, and odds of completing the deal
9. finalists do due diligence and submit final bids - price and method of payment, proof of financing,
draft of purchase agreement (proposed details of the deal including contingencies) - buyers will often
require additional contracts to keep key employees, customers and suppliers in place after the deal
closes
10. winner is chosen - best price and terms
, 11. shareholders vote on deal - a merger proxy is sent to them to provide them with information about
the proposed deal
12. government approval may be required
13. deal closes (ownership changes hands)
financial buyers - correct answer ✔✔investors and financial institutions that want to buy the company as
an investment
strategic buyers - correct answer ✔✔companies in the same business or related business
potential problems in selling a company - correct answer ✔✔- buyers can find problems during due
diligence and back out
- buyers financing falls through
- government or unions can try to block the sale
- customers may object
- buyers share price can fall (in a stock deal)
- buyer can get confidential information and then use it against the seller
indemnification - correct answer ✔✔- guarantee by seller to reimburse buyer if specific future problems
occur
- risk of seller bankruptcy (seller would then be unable to pay)
tax considerations of selling a business - correct answer ✔✔- taxes are based on gain on sale (sale price -
cost basis)
- old businesses often have a low cost basis --> potential tax problem
what is a Leveraged Buyout (LBO)? - correct answer ✔✔in an LBO, a business is acquired by an equity
sponsor (aka private equity firm)
- the business being acquired can be a public company, a private company, a subsidiary of a company or
a division of a company
- if it is a public company, the deal must be approved by the existing shareholders
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller BravelRadon. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $16.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
81113 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now