AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
Question 1. Which document formally signals the buyer’s intent to pursue an acquisition and
outlines the basic commercial terms?
A) Term Sheet
B) Letter of Intent (LOI)
C) Purchase Agreement
D) Confidentiality Agreement
Answer: B
Explanation: The LOI expresses the buyer’s preliminary commitment and sets out key deal
economics before definitive agreements are drafted.
Question 2. In a forward triangular merger, the acquiring company:
A) Merges into the target subsidiary and the target survives.
B) Merges the target into a newly created subsidiary of the acquirer.
C) Merges the target into the acquirer’s parent company.
D) Merges the acquirer into the target’s parent.
Answer: B
Explanation: A forward triangular merger creates a subsidiary of the acquirer that absorbs the
target; the target’s shareholders receive consideration, and the subsidiary survives.
Question 3. Which role is primarily responsible for structuring the purchase price allocation
among cash, stock, and assumed debt?
A) Legal counsel
B) Investment banker
C) Tax advisor
D) Insurance broker
Answer: B
,AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
Explanation: Investment bankers lead the financial structuring of the transaction, including how
the purchase price is allocated among various consideration forms.
Question 4. Cost synergies in an M&A transaction most often arise from:
A) Cross‑selling opportunities to new customers.
B) Consolidation of back‑office functions.
C) Expansion into new geographic markets.
D) Development of new product lines.
Answer: B
Explanation: Cost synergies are achieved by eliminating duplicate functions such as finance, HR,
and IT, leading to lower operating expenses.
Question 5. During financial due diligence, “debt‑like” items refer to:
A) Off‑balance‑sheet liabilities that behave like debt.
B) Long‑term assets that generate cash flow.
C) Equity grants that have vesting periods.
D) Contingent consideration payable after closing.
Answer: A
Explanation: Debt‑like items are obligations such as lease liabilities or pension obligations that,
while not recorded as debt, have similar cash‑flow impacts.
Question 6. Which type of litigation is most commonly examined in legal due diligence for a
target company?
A) Patent infringement disputes.
B) International trade sanctions.
C) Employment class actions.
,AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
D) Maritime collision claims.
Answer: C
Explanation: Employment class actions are frequent because they can involve large, undisclosed
liabilities that affect the target’s financial health.
Question 7. A “run‑off” insurance policy is best described as:
A) A policy that terminates immediately after closing.
B) A policy covering claims arising from prior periods after the policy expires.
C) A policy that provides coverage for future operational risks.
D) A policy that automatically renews each year.
Answer: B
Explanation: Run‑off policies cover claims that arise from events occurring before the policy’s
termination date but are reported later.
Question 8. In assessing the need for special‑situation insurance, the primary factor is:
A) The target’s market share.
B) The presence of material unknown liabilities.
C) The buyer’s credit rating.
D) The size of the transaction relative to the buyer’s revenue.
Answer: B
Explanation: Special‑situation insurance is used to protect against material, uncertain risks that
could affect the transaction’s economics.
Question 9. Representations & Warranties Insurance (R&WI) that is purchased by the buyer is
known as:
A) Seller‑side R&WI
, AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
B) Buyer‑side R&WI
C) Dual‑side R&WI
D) Third‑party R&WI
Answer: B
Explanation: Buyer‑side R&WI protects the buyer from breaches of the seller’s representations
and warranties.
Question 10. The “drop‑down” provision in a seller‑side R&WI policy primarily serves to:
A) Increase the policy limit after closing.
B) Reduce the deductible as claims are paid.
C) Shift the retention from the buyer to the seller after a claim is made.
D) Extend the policy period beyond the PSA survival period.
Answer: C
Explanation: The drop‑down mechanism transfers the retention (deductible) to the seller once
the buyer makes a claim, aligning incentives.
Question 11. Which of the following is a typical exclusion in most R&WI policies?
A) Breach of a representation relating to cash flow.
B) Known claims that existed before signing the PSA.
C) Environmental contamination discovered post‑closing.
D) Tax liabilities arising from prior periods.
Answer: B
Explanation: Known claims are excluded because the insurer cannot cover risks that the buyer
was already aware of.
Question 12. Tax liability insurance primarily protects against:
Advisor CMAIA Exam
Question 1. Which document formally signals the buyer’s intent to pursue an acquisition and
outlines the basic commercial terms?
A) Term Sheet
B) Letter of Intent (LOI)
C) Purchase Agreement
D) Confidentiality Agreement
Answer: B
Explanation: The LOI expresses the buyer’s preliminary commitment and sets out key deal
economics before definitive agreements are drafted.
Question 2. In a forward triangular merger, the acquiring company:
A) Merges into the target subsidiary and the target survives.
B) Merges the target into a newly created subsidiary of the acquirer.
C) Merges the target into the acquirer’s parent company.
D) Merges the acquirer into the target’s parent.
Answer: B
Explanation: A forward triangular merger creates a subsidiary of the acquirer that absorbs the
target; the target’s shareholders receive consideration, and the subsidiary survives.
Question 3. Which role is primarily responsible for structuring the purchase price allocation
among cash, stock, and assumed debt?
A) Legal counsel
B) Investment banker
C) Tax advisor
D) Insurance broker
Answer: B
,AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
Explanation: Investment bankers lead the financial structuring of the transaction, including how
the purchase price is allocated among various consideration forms.
Question 4. Cost synergies in an M&A transaction most often arise from:
A) Cross‑selling opportunities to new customers.
B) Consolidation of back‑office functions.
C) Expansion into new geographic markets.
D) Development of new product lines.
Answer: B
Explanation: Cost synergies are achieved by eliminating duplicate functions such as finance, HR,
and IT, leading to lower operating expenses.
Question 5. During financial due diligence, “debt‑like” items refer to:
A) Off‑balance‑sheet liabilities that behave like debt.
B) Long‑term assets that generate cash flow.
C) Equity grants that have vesting periods.
D) Contingent consideration payable after closing.
Answer: A
Explanation: Debt‑like items are obligations such as lease liabilities or pension obligations that,
while not recorded as debt, have similar cash‑flow impacts.
Question 6. Which type of litigation is most commonly examined in legal due diligence for a
target company?
A) Patent infringement disputes.
B) International trade sanctions.
C) Employment class actions.
,AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
D) Maritime collision claims.
Answer: C
Explanation: Employment class actions are frequent because they can involve large, undisclosed
liabilities that affect the target’s financial health.
Question 7. A “run‑off” insurance policy is best described as:
A) A policy that terminates immediately after closing.
B) A policy covering claims arising from prior periods after the policy expires.
C) A policy that provides coverage for future operational risks.
D) A policy that automatically renews each year.
Answer: B
Explanation: Run‑off policies cover claims that arise from events occurring before the policy’s
termination date but are reported later.
Question 8. In assessing the need for special‑situation insurance, the primary factor is:
A) The target’s market share.
B) The presence of material unknown liabilities.
C) The buyer’s credit rating.
D) The size of the transaction relative to the buyer’s revenue.
Answer: B
Explanation: Special‑situation insurance is used to protect against material, uncertain risks that
could affect the transaction’s economics.
Question 9. Representations & Warranties Insurance (R&WI) that is purchased by the buyer is
known as:
A) Seller‑side R&WI
, AIIM Certified Merger Acquisition MA Insurance
Advisor CMAIA Exam
B) Buyer‑side R&WI
C) Dual‑side R&WI
D) Third‑party R&WI
Answer: B
Explanation: Buyer‑side R&WI protects the buyer from breaches of the seller’s representations
and warranties.
Question 10. The “drop‑down” provision in a seller‑side R&WI policy primarily serves to:
A) Increase the policy limit after closing.
B) Reduce the deductible as claims are paid.
C) Shift the retention from the buyer to the seller after a claim is made.
D) Extend the policy period beyond the PSA survival period.
Answer: C
Explanation: The drop‑down mechanism transfers the retention (deductible) to the seller once
the buyer makes a claim, aligning incentives.
Question 11. Which of the following is a typical exclusion in most R&WI policies?
A) Breach of a representation relating to cash flow.
B) Known claims that existed before signing the PSA.
C) Environmental contamination discovered post‑closing.
D) Tax liabilities arising from prior periods.
Answer: B
Explanation: Known claims are excluded because the insurer cannot cover risks that the buyer
was already aware of.
Question 12. Tax liability insurance primarily protects against:
