Series 79 - Practice Exam 2 || very Flawless.
Rank the following events in the order in which they occur in an M&A auction process
:I. Seller gives a potential acquirer a tour of the key facilities
II. Seller announces signing of a Definitive Agreement
III. Buyers receive the Final Procedures Letter
IV. Buyers submit final bids correct answers 1,3,4,2
In an M&A transaction, key process documents typically follow this order:
1. Seller signs an engagement letter with an adviser.
2. Seller delivers a Teaser to each potential acquirer along with a Confidentiality Agreement
(CA)
3. Acquirers sign and return the CA
4. Seller delivers a Confidential Information Memorandum (CIM), also called a Detailed
Memorandum or Information Memorandum, to each potential acquirer along with the Initial Bid
Procedures Letter.
5. Seller receives first round bids from potential acquirers. First round bids may be called
Indications of Interest (IOIs), Statements of Interest (SOIs) or Letters of Intent (LOIs)
6. In the second round, the seller and buyer do site visits, management presentations, and the
seller makes the data room available.
7. The seller distributes the Final Bid Procedures Letter to each potential acquirer.
8. The seller receives Final (i.e. Second Round) Bids from each potential acquirer.
9. The seller and acquirer sign a Definitive Agreement and announce the transaction.
What is FALSE about a 363 Asset Sale?
-The buyer in a 363 Asset Sale receives the assets free and clear of any encumbrances.
-A 363 Sale is used in order for the bankrupt company to arrange DIP Financing.
-363 sale approved by bankruptcy court
-stalking horse is initial buyer in 363 sale correct answers False = 363 sale used to arrange dip
financing (false because dip financing occurs earlier in process)
The XYZ Pension Program, an employee benefit plan, wishes to invest in an IPO. The plan has
$20 billion in assets and has been in business 19 years. It is sponsored by XYZ Corporation and
79% of the company's employees participate. What additional requirement must the plan meet to
participate in the IPO? correct answers Under FINRA Rule 5130, employee benefit plans may
participate in IPOs provided they are not sponsored solely by a broker-dealer, have at least
10,000 participants or beneficiaries, and have at least $10 billion in assets.
For a sell-side assignment, which of the following are the best reasons for the banker to conduct
comprehensive due diligence on its client?
I. To better anticipate buyer concerns
II. To analyze a potential bid by the investment bank for the target
III. To better understand the company's investment highlights
IV. To decide if the investment banking representative should invest in the stock. correct answers
1 and 3
, Under what circumstance does Regulation FD prohibit companies from making selective
disclosure of material information to their own employees?
-When selective information would give an employee an unfair trading advantage
-When employees are suspected of sharing information with others
-When employees are shareholders
-In no case, a company can always disclose information to employees under Regulation FD.
correct answers In no case - company can always disclose info to employees under Reg FD
Regulation FD applies to communications with outsiders, not inside the company. It does not
prevent the disclosure of any information, including material information, to employees. Instead,
officers, directors and employees are subject to separate insider trading rules.
Which of the following statements is accurate in relation to bankruptcy? correct answers A
white-knight refers to a company buying a distressed firm prior to that firm declaring
bankruptcy.
-When the initial vote in a bankruptcy fails to reach an agreement, then the fulcrum class will
vote in order to resolve any deadlock. Insiders that are part of the fulcrum class are not allowed
to vote to resolve any deadlock.
-Any company that has filed for Bankruptcy in the last three years cannot file a shelf registration.
-DIP financiers receive a priority status in terms of being paid back their loans. Otherwise, it
would be difficult to find lenders willing to provide financing.
What information can typically be found in a Schedule 14D-9?
-I. Prospectus for securities issued as purchase consideration in an M&A transaction
II. Recommendation from target's Board of Directors on how to respond to a tender offer
III. Fairness opinion
IV. Proxy statement correct answers 2,3
. A Schedule 14D-9 includes a recommendation by the company's board of directors on whether
shareholders should accept or reject the tender.
-The prospectus for securities issued as purchase consideration in an M&A transaction is
contained in an S-4. The proxy statement is a separate legal document that a target sends to its
shareholders containing comprehensive information about the offer and key terms
An S-4 registration statement contains all of the following EXCEPT
terms of the issuance
-terms of issuance
-detailed shareholder lists
- purchasing price details
-transaction terms correct answers Detailed shareholder lists
When a public acquirer issues shares as part of the purchase consideration for a public target, the
acquirer is typically required to file a registration statement/prospectus (S-4) in order for those
shares to be freely tradable by the target's shareholders. Similarly, if the acquirer is issuing public
Rank the following events in the order in which they occur in an M&A auction process
:I. Seller gives a potential acquirer a tour of the key facilities
II. Seller announces signing of a Definitive Agreement
III. Buyers receive the Final Procedures Letter
IV. Buyers submit final bids correct answers 1,3,4,2
In an M&A transaction, key process documents typically follow this order:
1. Seller signs an engagement letter with an adviser.
2. Seller delivers a Teaser to each potential acquirer along with a Confidentiality Agreement
(CA)
3. Acquirers sign and return the CA
4. Seller delivers a Confidential Information Memorandum (CIM), also called a Detailed
Memorandum or Information Memorandum, to each potential acquirer along with the Initial Bid
Procedures Letter.
5. Seller receives first round bids from potential acquirers. First round bids may be called
Indications of Interest (IOIs), Statements of Interest (SOIs) or Letters of Intent (LOIs)
6. In the second round, the seller and buyer do site visits, management presentations, and the
seller makes the data room available.
7. The seller distributes the Final Bid Procedures Letter to each potential acquirer.
8. The seller receives Final (i.e. Second Round) Bids from each potential acquirer.
9. The seller and acquirer sign a Definitive Agreement and announce the transaction.
What is FALSE about a 363 Asset Sale?
-The buyer in a 363 Asset Sale receives the assets free and clear of any encumbrances.
-A 363 Sale is used in order for the bankrupt company to arrange DIP Financing.
-363 sale approved by bankruptcy court
-stalking horse is initial buyer in 363 sale correct answers False = 363 sale used to arrange dip
financing (false because dip financing occurs earlier in process)
The XYZ Pension Program, an employee benefit plan, wishes to invest in an IPO. The plan has
$20 billion in assets and has been in business 19 years. It is sponsored by XYZ Corporation and
79% of the company's employees participate. What additional requirement must the plan meet to
participate in the IPO? correct answers Under FINRA Rule 5130, employee benefit plans may
participate in IPOs provided they are not sponsored solely by a broker-dealer, have at least
10,000 participants or beneficiaries, and have at least $10 billion in assets.
For a sell-side assignment, which of the following are the best reasons for the banker to conduct
comprehensive due diligence on its client?
I. To better anticipate buyer concerns
II. To analyze a potential bid by the investment bank for the target
III. To better understand the company's investment highlights
IV. To decide if the investment banking representative should invest in the stock. correct answers
1 and 3
, Under what circumstance does Regulation FD prohibit companies from making selective
disclosure of material information to their own employees?
-When selective information would give an employee an unfair trading advantage
-When employees are suspected of sharing information with others
-When employees are shareholders
-In no case, a company can always disclose information to employees under Regulation FD.
correct answers In no case - company can always disclose info to employees under Reg FD
Regulation FD applies to communications with outsiders, not inside the company. It does not
prevent the disclosure of any information, including material information, to employees. Instead,
officers, directors and employees are subject to separate insider trading rules.
Which of the following statements is accurate in relation to bankruptcy? correct answers A
white-knight refers to a company buying a distressed firm prior to that firm declaring
bankruptcy.
-When the initial vote in a bankruptcy fails to reach an agreement, then the fulcrum class will
vote in order to resolve any deadlock. Insiders that are part of the fulcrum class are not allowed
to vote to resolve any deadlock.
-Any company that has filed for Bankruptcy in the last three years cannot file a shelf registration.
-DIP financiers receive a priority status in terms of being paid back their loans. Otherwise, it
would be difficult to find lenders willing to provide financing.
What information can typically be found in a Schedule 14D-9?
-I. Prospectus for securities issued as purchase consideration in an M&A transaction
II. Recommendation from target's Board of Directors on how to respond to a tender offer
III. Fairness opinion
IV. Proxy statement correct answers 2,3
. A Schedule 14D-9 includes a recommendation by the company's board of directors on whether
shareholders should accept or reject the tender.
-The prospectus for securities issued as purchase consideration in an M&A transaction is
contained in an S-4. The proxy statement is a separate legal document that a target sends to its
shareholders containing comprehensive information about the offer and key terms
An S-4 registration statement contains all of the following EXCEPT
terms of the issuance
-terms of issuance
-detailed shareholder lists
- purchasing price details
-transaction terms correct answers Detailed shareholder lists
When a public acquirer issues shares as part of the purchase consideration for a public target, the
acquirer is typically required to file a registration statement/prospectus (S-4) in order for those
shares to be freely tradable by the target's shareholders. Similarly, if the acquirer is issuing public
