FIN 461 Exam 1 Miami University Questions
with Verified Correct Answers
Why does M&A tend to occur in waves?
(1) Cyclical patterns with strong correlation between S&P performance and the amount of
M&A activity.
(2) Companies can use their stock to make acquisitions when their stock price is high.
4 Factors that contribute to M&A waves
(1) Liquidity; most recent factor in M&A wave
(2) Disruptive Technology; 1990's
(3) Regulation/Deregulation; 1980's
(4) 'Shocks'; oil prices, recent trends with SPACs/ESG
Motives for why firms engage in M&A transactions
(1) Synergies
(2) Diversification
Main M&A players and their roles
1. Identify strategic alternatives
2. Value maximization, 3.speed of execution
4. Certainty of completion
Horizontal Integration
driven by economies of scale & scope
Vertical Integration
motive is greater control over production and distribution
, Backward Integration (Vertical Integration)
upstream; raw material supplies, manufacturing/production
Forward Integration (Vertical Integration)
downstream; distribution, end user
Conglomeration
driven by desire to diversify
Who wins in an M&A transaction?
the target firm (targets shareholders make better returns)
Who loses in an M&A transaction?
the acquiring firm; returns are negative however, positive returns for acquirer are situational
and include the target, size, and consideration
What factors DO matter in creating value for the acquirer?
(1) Financing structure
(2) Target company status
(3) Earnings growth
(4) Foreign vs domestic acquisitions
What factors DO NOT matter in creating value for the acquirer?
(1) EPS impact
(2) Transaction size
(3) Profitability & volatility
(4) Credit rating impact
(5) Industry
with Verified Correct Answers
Why does M&A tend to occur in waves?
(1) Cyclical patterns with strong correlation between S&P performance and the amount of
M&A activity.
(2) Companies can use their stock to make acquisitions when their stock price is high.
4 Factors that contribute to M&A waves
(1) Liquidity; most recent factor in M&A wave
(2) Disruptive Technology; 1990's
(3) Regulation/Deregulation; 1980's
(4) 'Shocks'; oil prices, recent trends with SPACs/ESG
Motives for why firms engage in M&A transactions
(1) Synergies
(2) Diversification
Main M&A players and their roles
1. Identify strategic alternatives
2. Value maximization, 3.speed of execution
4. Certainty of completion
Horizontal Integration
driven by economies of scale & scope
Vertical Integration
motive is greater control over production and distribution
, Backward Integration (Vertical Integration)
upstream; raw material supplies, manufacturing/production
Forward Integration (Vertical Integration)
downstream; distribution, end user
Conglomeration
driven by desire to diversify
Who wins in an M&A transaction?
the target firm (targets shareholders make better returns)
Who loses in an M&A transaction?
the acquiring firm; returns are negative however, positive returns for acquirer are situational
and include the target, size, and consideration
What factors DO matter in creating value for the acquirer?
(1) Financing structure
(2) Target company status
(3) Earnings growth
(4) Foreign vs domestic acquisitions
What factors DO NOT matter in creating value for the acquirer?
(1) EPS impact
(2) Transaction size
(3) Profitability & volatility
(4) Credit rating impact
(5) Industry
