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WSO M&A QUESTIONS & ANSWERS SOLVED 100% CORRECT!!
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WSO M&A QUESTIONS & ANSWERS SOLVED 100% CORRECT!!
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Name: Score:35 Multiple choice questions
Definition 1 of 35
Goodwill and other intangible assets are similar in nature in that they are both non-physical assets
carried on a company's Balance Sheet. The main difference between the two is that goodwill is
only reduced in the event of a goodwill impairment or acquisition, whereas other intangible assets
are amortized over a fixed number of years.
What Is The Difference Between Goodwill And Other Intangible Assets?
What is the difference between a strategic and financial buyer?
What Is The Difference Between Shares Outstanding And Fully Diluted Shares?
How Do You Pick Purchase Multiples And Exit Multiples For An Lbo?
,Definition 2 of 35
First step in this method is to make an assumption around how much it costs to acquire the
company and how the acquisition would be financed (cash, debt or stock).
Second step is to create a projection model of both the buyer and seller's income statements
from revenue down to net income.
The next step is to combine the income statements. You do this by adding together each of the
individual line items.
Keep in mind that you do need to make a few slight adjustments. If the acquisition was financed
with debt, you have to add the additional amount of interest that would be paid on the new debt
to the net interest expense line. If it is financed with cash, you need to subtract the interest you
would have earned on that cash (interest income) from the net interest line. If it was financed by
issuing new shares, you must increase the share count.
The last step is to apply the buyer's tax rate to pretax net income to get the net income of the
combined company and then divide that number by the new number of shares outstanding to
arrive at the new EPS number and see if the transaction is accretive or dilutive.
Walk Me Through The Basics Of A Merger Model? (Aka An Accretion Dilution Model)
What Is The Difference Between Shares Outstanding And Fully Diluted Shares?
Walk Me Through A Merger Model
All Else Equal, How Would One Company Prefer To Pay For Another?
, Definition 3 of 35
Since cash is the cheapest source of capital, it would be the preferred way to purchase another
company if the purchaser had sufficient cash. On the other hand, a company wanting to keep a
significant cash buffer would prefer other ways of financing the transaction. If a company feels its
stock price is inflated, it would prefer to use that to pay for the acquisition. In short, the preferred
means of payment always depends upon the circumstances of the acquisition, the company, and
the market.
What Makes A Company An Attractive Target For A Leveraged Buyout?
Walk Me Through The Basics Of A Merger Model? (Aka An Accretion Dilution Model)
All Else Equal, How Would One Company Prefer To Pay For Another?
What Are Some Reasons That Two Companies Would Want To Merge?
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