Which form of integration expands an acquirer’s geographic reach, product lines,
services, or distribution channels?
A. Horizontal integration
B. Geographic integration
C. Vertical integration
D. Transitional integration
Which of the following is the cheapest form of financing?
A. Cash on hand
B. Debt financing
C. Equity financing
D. Stock sale
All of the following are reasons why comparable companies analysis should be used in
conjunction with other valuation methodologies EXCEPT:
I. Markets may be skewed due to investor sentiment
II. No two companies are the same
III. Valuation methods vary by sector
IV. Intrinsic valuation may be needed
A. Markets may be skewed due to investor sentiment
B. No two companies are the same
C. Valuation methods may vary by sector
D. Intrinsic valuation may be needed
A comprehensive set of information relevant to buyers can be found where?
A. Data room
B. CIM
C. Teaser
D. Confidentiality agreement
Where is a data room typically set up?
A. In the target company’s headquarters
B. Online
C. In Switzerland
D. In M&A advisor’s headquarters
What is normalized net income given the following information?
ﾧ
A. $505
B. $550
C. $385
D. $275
Given the following information, what, by itself, would cause the enterprise value to
equal $1,300.0mm?
• Equity Value: $1,400mm
• Cash: $200mm
• Total Debt: $300mm
A. A $100mm decrease in debt
B. A $100mm increase in cash
C. A $200mm increase in debt
D. A $200mm increase in cash
How is the equity value calculated for an M&A transaction when the target company is
private?
A. Share price multiplied by shares outstanding
B. Acquirer’s price per share multiplied by shares outstanding
C. Enterprise value less assumed/refinanced net debt
D. There is no equity value for a private company
When an acquirer buys a target in the same or a closely related business, synergies tend
to be:
A. Nonexistent
B. Greater
C. Lower
D. Unknown
If a target was purchased for $1,500.0m with an equity contribution of $500.0m, what is
the enterprise value of the target if it used $500.0m of cash flow to repay debt?
A. $1,000.0m
B. $500.0m
C. $1,500.0m
D. $2,000.0m
When preparing a pre-LBO model, the historical income statement is completed until
what point?
A. Net income
B. Operating expenses
C. Interest expenses
D. EBIT
What can protect investors from having debt with an attractive yield refinanced before
maturity?
A. Floating interest rate
B. Fixed interest rate
C. PIK
D. Call premium
What is the correct order for a precedent transaction analysis?
E. Select the universe of comparable acquisitions
F. Benchmark the comparable acquisitions
G. Locate the necessary deal-related and financial information
H. Spread key statistics, ratios, and transaction multiples
I. Determine valuation
A. E, H, F, G, I
B. E, G, H, F, I
C. I, H, G, E, F
D. F, G, H, I, E
In a post-LBO model, where are the debt repayment amounts linked to?
A. Investing activities on the cash flow statement
B. Financing activities on the cash flow statement
C. Income statement
D. Long-term debt on the balance sheet
Who decides to approve or reject a transaction in a one-step merger transaction for a
public company?
A. CEO
B. Board of directors
C. Target shareholders
D. CFO
A target was purchased for $1,500.0m with an equity contribution of $500.0m. By year
5 no debt has been repaid and enterprise value has grown by $500.0m. Assuming the
sponsor sells the target for its enterprise value, what is the sponsor’s cash return?
A. 2x
B. 3x
C. 1x
D. 5x
Which of the following scenarios is likely to generate the highest return?
A. An LBO financed with 50% debt
B. An LBO financed with 30% equity
C. An LBO financed with 80% debt
D. An LBO financed with 50% equity
In a DCF analysis, what is used to capture the remaining value of the target beyond the
projection period?
A. Intrinsic value
B. Terminal Value
C. WACC
D. Enterprise Value
Which of the following do/does not require a set amortization schedule?
A. Revolving credit facility
B. Term loan A
C. Term loan B
D. Senior notes
What is a private equity firm considered in an LBO?
A. A financial sponsor
B. A strategic investor
C. A passive investor
D. A limited partner
Which of the following correctly ranks the capital structure hierarchy?
A. High yield bonds, mezzanine debt, equity contribution, bank debt
B. Equity contribution, mezzanine debt, high yield bonds, bank debt
C. Equity contribution, high yield bonds, mezzanine debt, bank debt
D. Bank debt, mezzanine debt, high yield bonds, equity contribution
Calculate the
interest rate for a
revolving credit
facility in 2014
given the
following
information.
Details:
P
ricing spread: 350 bps.
A. 7.85%
B. 4.35%
C. 0.85%
D. 3.5%
All of the following are advantages of a negotiated sale EXCEPT:
A. High degree of confidentiality
B. Fastest timing
C. Less disruptive to the business
D. Potential to “leave money on the table”
Which of the following M&A scenarios tends to use an all-stock consideration?
A. Horizontal integration
B. Vertical integration
C. Merger of equals
D. Forward integration
When there is no debt in the capital structure, what is WAAC equal to?
A. Cost of debt
B. Debt-to-total capitalization ratio
C. Equity-to-total capitalization ratio
D. Cost of equity
In an LBO, financing fees are a(n):
A. Deferred asset
B. Asset
C. Deferred expense
D. Current liability
Calculate a target’s deferred tax liability given the following details.
Details:
Tangible asset write-up: $100.0m
Intangible asset write-up: $50.0m
Total asset write-up: $150.0m
Tax rate: 38%
A. $57.0m
B. $19.0m
C. $114.0m
D. $76.0m
All of the following assets can be amortized EXCEPT:
A. Copyrights
B. Patents
C. Goodwill
D. PP&E
Calculate the EBITDA margin given the following information.
• EBITDA: $200.0m
• COGS: $200.0m
• Sales: $1,000.0m
• Net income: $150.0m
A. 20%
B. 15%
C. 40%
D. 25%
All of the following are valuation methodologies used by financial sponsors EXCEPT:
A. LBO model
B. Precedent transitions analysis
C. Comparable companies analysis
D. Accretion/(dilution) analysis
Calculate the fixed exchange ratio based on the following transaction details.
Transaction Details:
AcquirerCo agrees to purchase TargetCo in an all-stock transaction valued at $2.0
billion. TargetCo’s shareholders will receive one share of AcquirerCo’s stock for every
four shares of TargetCo stock they own.
A. 4
B. .25
C. 1.00
D. .5
The target’s board of directors typically requires __________ before making a
recommendation on whether to accept the offer and approve the execution of a
definitive agreement.
A. Additional due diligence
B. A fairness opinion
C. A sum of the parts analysis
D. All of the above
In the M&A sales process, projected financial information can be found in which
document?
A. 10-K
B. 8-K
C. CIM
D. 424B3
Which exit strategy provides the sponsor with the ability to retain 100% of its existing
ownership position in the target?
A. Sale to a strategic buyer
B. IPO
C. Dividend recapitalization
D. Private sale
