FIN 461 Exam 1 Miami University WITH ANSWERS

FIN 461 Exam 1 Miami University WITH
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ANSWERS

Why does M&A tend to occur in waves? - CORRECT ANSWERS
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✔✔(1) Cyclical patterns with strong correlation between S&P
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performance and the amount of M&A activity. |\ |\ |\ |\ |\ |\




(2) Companies can use their stock to make acquisitions when
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their stock price is high.
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4 Factors that contribute to M&A waves - CORRECT ANSWERS
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✔✔(1) Liquidity; most recent factor in M&A wave
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(2) Disruptive Technology; 1990's
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(3) Regulation/Deregulation; 1980's
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(4) 'Shocks'; oil prices, recent trends with SPACs/ESG
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Motives for why firms engage in M&A transactions - CORRECT
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ANSWERS ✔✔(1) Synergies |\ |\




(2) Diversification
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Main M&A players and their roles - CORRECT ANSWERS ✔✔1.
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Identify strategic alternatives |\ |\




2. Value maximization, 3.speed of execution
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4. Certainty of completion
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,Horizontal Integration - CORRECT ANSWERS ✔✔driven by
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economies of scale & scope |\ |\ |\ |\




Vertical Integration - CORRECT ANSWERS ✔✔motive is greater
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control over production and distribution
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Backward Integration (Vertical Integration) - CORRECT ANSWERS
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✔✔upstream; raw material supplies, manufacturing/production |\ |\ |\ |\




Forward Integration (Vertical Integration) - CORRECT ANSWERS
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✔✔downstream; distribution, end user |\ |\ |\




Conglomeration - CORRECT ANSWERS ✔✔driven by desire to |\ |\ |\ |\ |\ |\ |\ |\


diversify


Who wins in an M&A transaction? - CORRECT ANSWERS ✔✔the
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target firm (targets shareholders make better returns)
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Who loses in an M&A transaction? - CORRECT ANSWERS ✔✔the
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acquiring firm; returns are negative however, positive returns for
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acquirer are situational and include the target, size, and
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consideration


What factors DO matter in creating value for the acquirer? -
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CORRECT ANSWERS ✔✔(1) Financing structure
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(2) Target company status
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(3) Earnings growth
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, (4) Foreign vs domestic acquisitions
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What factors DO NOT matter in creating value for the acquirer? -
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CORRECT ANSWERS ✔✔(1) EPS impact |\ |\ |\ |\




(2) Transaction size
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(3) Profitability & volatility
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(4) Credit rating impact
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(5) Industry
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The functions performed by investment banks - CORRECT
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ANSWERS ✔✔(1) M&A advisory |\ |\ |\




(2) Underwriting
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(3) Sales & Trading
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(4) Research
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(5) Syndicate
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How do investment banks get paid for their work? - CORRECT
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ANSWERS ✔✔different fees for advising and providing fairness
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opinion


The role played by investment banks in M&A transactions -
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CORRECT ANSWERS ✔✔(1) Identify strategic alternatives
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(2) Value maximization
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(3) Speed of execution
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(4) Certainty of completion
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