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Exam (elaborations)

CEPA - Exit Options And M&A: Questions/Solutions

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  • Course
  • CEPA
  • Institution
  • CEPA

CEPA - Exit Options And M&A: Questions/Solutions

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  • September 29, 2024
  • 10
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • CEPA
  • CEPA
avatar-seller
LeCrae
CEPA - Exit Options And M&A: Questions/Solutions

Inside Sale Options Right Ans - Intergenerational, to Partners, To
Managers, To EE's (ESOP)

Outside Sale Options Right Ans - Third Party, Recapitalization, Orderly
Liquidation

Advantages to 3rd Party Sale Right Ans - Highest Price, More Cash, Walk
Away Faster, Bus Refresh& new Energy

Disadvantages 3rd PartySale Right Ans - Distraction, Privacy, Longer
Process, Emotions, Complex

Advantages to Recapitalization Right Ans - Partial Exit Possible, Owner
diversification, Provides Capital for Growth, 2nd bite of Apple

Disadvantages to Recapitalization Right Ans - May not be Clean break, Loss
of control, Culture Shift

Most Common PE Transaction Types Right Ans - Buyout, Family
Succession, Recap's, Corp Divesture, Growth Capital

The 3 legs that PE firms look at Right Ans - Company, Management and
Deal

SWOT analysis Right Ans - strengths, weaknesses, opportunities, threats

Most Common M&A Basic Transaction Options? Right Ans - Outright Sale,
Majority Recap, Minority Recap and Debt Recap

Some of Top Seller Mistakes Right Ans - Not being represented, not
providing accurate info, Bad earnest, Waiting for next years growth, limiting
buyer pool

M&A Process Right Ans - Strategy and Planning, Research and Analysis,
Materials Prep, Marketing and Bid Generation, Negotiation and Due Diligence,
Closing and Documentation

, Controlled Auction Right Ans - Competitive process

Negotiated Sale Right Ans - Deal with Individualizing Buyer, Better for
Buyer b/c less completion, usually smaller Transactions

Sellers prefer what Type of Sale Right Ans - Stock - B/c Lower taxes, Less
Liability

Buyers Prefer prefer what Type of Sale Right Ans - Asset - Step up, B/c can
re-depreciate equip, Can decide on Assets they want

Two main types of Buyers Right Ans - Financial and Strategic

Strategic Buyers are usually who Right Ans - Synergies (Competitor,
Supplier, etc) - Pay Prem (Layoffs, Culture issues)

Financial Buyers are usually who Right Ans - PE, Family Ofc, HNW (More
complex)

Intergenerational Transfer Advantages Right Ans - Continuity, Legacy,
Lower Cost, More Control

Intergenerational Transfer disadvantages Right Ans - Family Dynamics,
Illiquid Buyers, Lower Sale price

Success rates of transferring to 2 and 3 generations Right Ans - 30% and
12%

Invest. Banker Role Right Ans - Negotiate transaction for business,
formalize process, maintain confidentiality, generate buyers, help with owner
emotions

Middle Market Range Right Ans - $5M to $1B

Advantages of Strategic Buyer Right Ans - Usually Pay premium for control,
quickest way to exit

Disadvantages of Strategic buyer Right Ans - Confidentiality, Layoffs and
Culture shocks

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