M&A Deals and Merger Models Questions & Answers 100% Correct!!
2 views 0 purchase
Course
M&A Deals and Merger Models
Institution
M&A Deals And Merger Models
Why do you buy another company ? - ANSWER because you believe that you will be better off in the sense that you grow profits and cash flows to a similar level but it would take more time and more money to do this independently
When should you purchase a company ? - ANSWER when the asking price...
M&A Deals and Merger Models
Questions & Answers 100% Correct!!
Why do you buy another company ? - ANSWER because you believe that you will be better off in the
sense that you grow profits and cash flows to a similar level but it would take more time and more
money to do this independently
When should you purchase a company ? - ANSWER when the asking price <intrinsic value and the
IRR> WACC
Companies prefer to pursue deals that are _____ to EPS meaning - ANSWER accretive which is good
for shareholders
financial reasons why you may acquire another company - ANSWER economies of scale/
consolidation, geographic expansion, gain market share, seller is undervalued, acquire customers or
distribution channels, tax reductions, product expansion or diversification
Economies of scale - ANSWER biggest and second biggest companies in the market combine and get
better deals with suppliers and save money.
gain market share - ANSWER neither the buyer nor the seller is growing because the market is
competitive and the products/services are nearly the same.
if one company acquires another, it instantly captures market share
seller is undervalued - ANSWER asking price seems attractive because its share price has fallen
significantly and the buyer sees an opportunity to purchase a cheap asset
, how does purchasing a company have tax reductions? - ANSWER buyer could "invert" by acquiring a
seller in a low tax jurisdiction like Ireland and then claiming it is headquartered there
Fuzzy Reasons for M&A deals - ANSWER intellectual property/patent/key technology
defensive acquisition
acqui-hire
intellectual property/patent/key technology - ANSWER wants something the target has, can't
determine exactly how much revenue, profit, or cash flow this thing will produce
defensive acquisition - ANSWER acquirer is fearful of fast-growing competitors and acquires it to
prevent disruption of its main business.
acqui-hire - ANSWER recruiting top-notch employees is expensive. why not just shortcut the whole
process by buying an entire, smaller company and hiring everyone like that ? which explains the
rationale behind buying tech startups
sell-side process - ANSWER 1) plan the process and create the marketing materials which includes
sending the confidential information memorandum and offering memorandum.
2) contact the initial set of buyers and send the confidential information memorandum
3) set up management meetings and presentations with those buyers who have remained interested
4) solicit initial and subsequent bids from buyers: set a deadline for indications of interest
5) conduct final negotiations, arrange financing and close the deal in which buyers will conduct due
diligence and reach a definitive agreement
due diligence - ANSWER reviewing your company's financial statements, taxes, customer contracts
etc.
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 EFT, 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 this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller papersbyjol. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R262,10. You're not tied to anything after your purchase.
