FIN 461 Exam 4
Miami
A
VI
University: Exam
TU
Questions and
IS
M
Correct
O
A
Solutions 2025!!
N
JP
, Mergers and Acquisitions tend to - ANSWER follow the reactions of the market
(S&P 500)
M&A Motives - ANSWER Synergies, Diversification, Strategic, Hubris, Buy
undervalued / sell overvalued assets, Mismanagement, Managerialism, Tax
considerations, Market power
Operational Synergies - ANSWER Cost savings, revenue enhancements, process
involvements
A
Financial Synergies - ANSWER Financial Engineering and Tax Benefits
Finance research suggests that diversification may destroy value because - ANSWER
VI
Inefficient internal capital markets
Reduced managerial accountability / greater entrenchment
TU
Loss of focus
Incentive problems
IS
Horizontal Integration - ANSWER driven by economies of scale & scope
Vertical integration - ANSWER motive is greater control over production &
distribution
M
-Backward integration
-Forward integration
O
conglomeration - ANSWER driven by desire to diversify
Leveraged Buyout (LBO) - ANSWER the acquisition of a target using debt to finance
A
a large portion of the purchase price.
N
-Historically, 60-70% debt and 30-40% equity
-Equity contribution comes from a financial sponsor
JP
Leverage is key to LBOs because - ANSWER -Enables sponsor to contribute small
equity investment
-Enables sponsor to achieve desired returns (20%+ annualized)
-Tax savings due to tax deductibility of interest payments
-Some argue leverage improves firm governance
Different Types of M&A financing - ANSWER Cash on hand
Debt financing
Miami
A
VI
University: Exam
TU
Questions and
IS
M
Correct
O
A
Solutions 2025!!
N
JP
, Mergers and Acquisitions tend to - ANSWER follow the reactions of the market
(S&P 500)
M&A Motives - ANSWER Synergies, Diversification, Strategic, Hubris, Buy
undervalued / sell overvalued assets, Mismanagement, Managerialism, Tax
considerations, Market power
Operational Synergies - ANSWER Cost savings, revenue enhancements, process
involvements
A
Financial Synergies - ANSWER Financial Engineering and Tax Benefits
Finance research suggests that diversification may destroy value because - ANSWER
VI
Inefficient internal capital markets
Reduced managerial accountability / greater entrenchment
TU
Loss of focus
Incentive problems
IS
Horizontal Integration - ANSWER driven by economies of scale & scope
Vertical integration - ANSWER motive is greater control over production &
distribution
M
-Backward integration
-Forward integration
O
conglomeration - ANSWER driven by desire to diversify
Leveraged Buyout (LBO) - ANSWER the acquisition of a target using debt to finance
A
a large portion of the purchase price.
N
-Historically, 60-70% debt and 30-40% equity
-Equity contribution comes from a financial sponsor
JP
Leverage is key to LBOs because - ANSWER -Enables sponsor to contribute small
equity investment
-Enables sponsor to achieve desired returns (20%+ annualized)
-Tax savings due to tax deductibility of interest payments
-Some argue leverage improves firm governance
Different Types of M&A financing - ANSWER Cash on hand
Debt financing
