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What situation would lead to a higher purchase price for a company?
A. Merger of equals
B. Targeted auction
C. Hostile situation
D. Private equity deal
Which of the following is likely to be a non-recurring item on an income statement?
A. SG&A
B. Interest expense
C. Depreciation
D. Goodwill impairment
A company that brings together a broad range of businesses is considered:
A. Horizontally integrated
B. A conglomerate
C. An oligopoly
D. Vertically integrated
What is a common multiple to use in a comparable companies analysis for a retail
company?
A. EV / Subscribers
B. EV / Reserves
C. EV / Square footage
D. EV / Production
Which expense reduces the life of an intangible asset?
A. Depreciation
B. Accelerated Depreciation
C. Amortization
D. Capex
Calculate the market risk premium given the following information.
A. 13%
B. 6%
C. 7%
D. 20%
Calculate the ratio of debt-to-total capitalization given the following information.
A. 3%
B. 2.7%
C. 1.5%
D. 2%
An 8-K or current report may be helpful for a comparable companies analysis as it
contains which of the following?
A. Management discussion and analysis
B. Pro forma adjustments
C. Material corporate events or changes
D. A comprehensive company overview
All of the following are considered cost synergies EXCEPT:
A. Head count reduction
B. Consolidation of facilities
C. Lower cost of capital
D. Economies of scale
Which act requires that both parties in a large M&A transaction file notifications and
report forms to the FTC and the DOJ?
A. Jones Act
B. Glass-Steagall Act
C. Sarbanes-Oxley Act
D. Hart-Scott-Rodino Act
Which part of the pro forma balance sheet is affected by the debt schedule?
A. Long-term liabilities
B. PP&E
C. Short-term assets
D. Goodwill
When may a Schedule 13E-3 be issued?
A. In a tender offer
B. In a one-step merger transaction
C. When a public acquirer issues shares as part of the purchase consideration of a public
target
D. In a leveraged buyout of a public company
Assuming this is a stock deal, calculate the goodwill created in the M&A transaction
given the following details.
Details:
Shareholders’ equity: $5,000.0m
Existing goodwill: $1,500.0m
Equity purchase price: $6,600.0m
Tangible and intangible asset write-ups: $1,200.0m
Deferred tax liabilities: $800.0m
A. $2,000.0m
B. $1,500.0m
C. $2,700.0m
D. $3,200.0m
Which of the buyers can limit the scope of their due diligence?
A. Financial sponsor
B. Strategic buyer
C. Direct competitor
D. They are all equal
In which scenario must the equity value be grossed up to calculate the implied equity
value?
A. The target is a private company
B. The acquirer is a private company
C. The acquirer purchases less than 100% of outstanding shares
D. The acquirer purchases all outstanding shares
Which of the following LBO financing scenarios will lead to the highest interest
expense?
A. 80% equity
B. 20% debt
C. 60% debt
D. 20% equity
The teaser and CIM are both part of the:
A. Financial exhibits
B. Marketing materials
C. Confidentiality agreement
D. Contract
In which type of sale process does a seller have the least leverage?
A. Negotiated sale
B. Stock sale
C. Targeted auction
D. Broad auction
Which is the most common form of M&A deal structure?
A. Stock sale
B. Asset sale
C. Section 338 election
D. Cash on hand
In a DCF analysis, the target’s projected FCF and terminal value are discounted to the
present and summed to calculate the target’s:
A. Enterprise value
B. Market cap
C. Equity value
D. Current value
Under operating activities on a cash flow statement, amortization of financing fees is
linked from the:
A. CIM
B. Balance sheet
C. Income statement
D. Management case
Key conditions to signing and closing are found on which of the following documents?
A. CIM
B. Bid procedure letter
C. Teaser
D. Confidentiality agreement
What happens to enterprise value if a company raises $100.0m debt and holds it on its
balance sheet as cash?
A. EV remains the same
B. EV increases by $100.0m
C. EV decreases by $100.0m
D. EV decreases by $200.0m
Given the following information, calculate a company’s EBITDA margin.
Operating income: $250.0m
Sales: $800.0m
D&A: $50.0m
Gross profit: $500.0m
A. 40.0%
B. 37.5%
C. 31.25%
D. 68.75%
What is the primary metric used by sponsors to gauge the attractiveness of a potential
LBO as well as the performance of their existing investments?
A. DCF
B. IRR
C. Precedent transactions analysis
D. Comparable companies analysis
In which document can one find recommendation from the target’s board of directors
on how shareholders should respond to a tender offer?
A. 8-K
B. Schedule 13E-3
C. 10-Q
D. Schedule 14D-9
In which of the following scenarios would a sell-side advisor consider running a broad
auction?
A. Seller is flexible regarding timing
B. Seller is flexible regarding potential business disruption
C. Confidentiality is not a priority
D. All of the above
Use the average interest expense approach to calculate the annual interest expense
given the following details.
Details:
Beginning TLB: $300.0
Ending TLB: $250.0
Interest rate: 4%
A. $11.0m
B. $12.0m
C. $10.0m
D. $9.0m
What is another name for a limited partnership structured as a fixed-life investment
vehicle?
A. General partnership
B. Blind pool
C. Passive investment
D. SPAC
What is needed to build the pro forma balance sheet once the pre-LBO model is
finished?
A. CIM
B. Proxy statement
C. Sources and uses of funds
D. 10-K
When is an issues list used in the M&A sale process?
A. After the potential buyer submits the revised definitive agreement
B. Before the seller send the revised definitive agreement
C. If the buyer does not want to submit a revised definitive agreement before it is
informed it won the auction
D. At the beginning of the M&A sale process
In a pre-LBO model, what is the new line item “financing fees” under?
A. Long-term liabilities
B. Long-term assets
C. Short-term liabilities
D. Short-term assets
Which type of corporation is taxed separately from its shareholders?
A. S corporation
B. C corporation
C. LLC
D. All corporations
Calculate the DSO of a company given the following information.
A. 0.02
B. 0.06
C. 21.9
D. 7.3
Which of the following is NOT a benefit of debt financing from the acquirer’s
prospective?
A. EPS accretion
B. Tax deductibility
C. Lack of covenants
D. Return on equity
