INVESTMENT BANKING (Economics Finance)
PRACTICE QUESTIONS AND ANSWERS FOR
FINAL EXAM ACCURATE AND VERIFIED A.
Select ALL that apply. Which of the following marketing documents
contains detailed financial projections?
I. Final bid procedures letter
II. CIM
III. Management presentation
IV. Teaser
A. I and II
B. II and III
C. II and IV
D. I, III, and IV
B. The CIM contains a detailed section presenting historical and projected
financial information with accompanying narrative explaining both past and
expected future performance (MD&A). This data forms the basis for the
preliminary valuation analysis performed my prospective buyers. The
management presentation is typically structured as a slideshow with
accompanying hardcopy handout. The presentation format generally maps to
that of the CIM, but is more crisp and concise.
What document outlines the details and process for submitting first round
bids?
A. Final bid procedures letter
B. Teaser
C. Initial bid procedures letter
D. Confidentiality agreement
,C. The initial bid procedures letter, which is typically sent out to prospective
buyers following distribution of the CIM, states the date and time by which
interested parties must submit their written, non-binding preliminary
indications of interest ("IOI"). It also defines the exact information that should
be included in the bid.
What is the key legal document establishing a formal agreement between
a buyer and a seller to purchase the target?
A. Confidentiality agreement
B. Indenture
C. Definitive purchase/sale agreement
Credit agreement
C. The definitive agreement is a legally binding contract between a buyer and
seller detailing the terms and conditions of the sale transaction. Definitive
agreements involving public and private companies differ in terms of content,
although the basic format of the document is the same, containing an
overview of the transaction structure/deal mechanics, representations and
warranties, pre-closing commitments (including covenants), closing
conditions, termination provisions, and indemnities, as well as associated
disclosure schedules and exhibits.
What event usually marks the launch of a typical auction process?
A. Receipt of the CIM and management projections
B. Management presentation and access to the data room
C. Buyer contact and distribution of the teaser
D. Receipt of final bids from prospective buyers
C. The first round begins with the contacting of prospective buyers, which
marks the formal launch of the auction process. This typically takes the form
of a scripted phone call to each prospective buyer by a senior member of the
sell-side advisory deal team (either and M&A banker or the coverage banker
that maintains the relationship with a particular buyer).
, Under the most favorable scenario, approximately how long can a two-
step process take?
A. 10 days
B. 2 weeks
C. 5-6 weeks
D. 6 months
C. In a squeeze out scenario, the entire process can be completed much
quicker than in a one-step merger. If the requisite level of shares are tendered,
the merger becomes effective shortly afterward (e.g., the same day or within a
couple of days). In total, the transaction can be completed in as few as five
weeks.
Assuming all else being equal, if a company with a P/E of 12x acquires a
company with a P/E of 15x in an all stock deal, the transaction is ______?
A. Accretive
B. Dilutive
C. Breakeven
D. Cannot be determined
B. In an all-stock deal, if an acquirer has a lower P/E than the seller, the deal is
dilutive.
Which of the following are common types of synergies realized in M&A
transactions?
I. Merger
II. Revenue
III. Cost
IV. Stock
A. I and II
B. II and III
C. III and IV
D. II, III, and IV
PRACTICE QUESTIONS AND ANSWERS FOR
FINAL EXAM ACCURATE AND VERIFIED A.
Select ALL that apply. Which of the following marketing documents
contains detailed financial projections?
I. Final bid procedures letter
II. CIM
III. Management presentation
IV. Teaser
A. I and II
B. II and III
C. II and IV
D. I, III, and IV
B. The CIM contains a detailed section presenting historical and projected
financial information with accompanying narrative explaining both past and
expected future performance (MD&A). This data forms the basis for the
preliminary valuation analysis performed my prospective buyers. The
management presentation is typically structured as a slideshow with
accompanying hardcopy handout. The presentation format generally maps to
that of the CIM, but is more crisp and concise.
What document outlines the details and process for submitting first round
bids?
A. Final bid procedures letter
B. Teaser
C. Initial bid procedures letter
D. Confidentiality agreement
,C. The initial bid procedures letter, which is typically sent out to prospective
buyers following distribution of the CIM, states the date and time by which
interested parties must submit their written, non-binding preliminary
indications of interest ("IOI"). It also defines the exact information that should
be included in the bid.
What is the key legal document establishing a formal agreement between
a buyer and a seller to purchase the target?
A. Confidentiality agreement
B. Indenture
C. Definitive purchase/sale agreement
Credit agreement
C. The definitive agreement is a legally binding contract between a buyer and
seller detailing the terms and conditions of the sale transaction. Definitive
agreements involving public and private companies differ in terms of content,
although the basic format of the document is the same, containing an
overview of the transaction structure/deal mechanics, representations and
warranties, pre-closing commitments (including covenants), closing
conditions, termination provisions, and indemnities, as well as associated
disclosure schedules and exhibits.
What event usually marks the launch of a typical auction process?
A. Receipt of the CIM and management projections
B. Management presentation and access to the data room
C. Buyer contact and distribution of the teaser
D. Receipt of final bids from prospective buyers
C. The first round begins with the contacting of prospective buyers, which
marks the formal launch of the auction process. This typically takes the form
of a scripted phone call to each prospective buyer by a senior member of the
sell-side advisory deal team (either and M&A banker or the coverage banker
that maintains the relationship with a particular buyer).
, Under the most favorable scenario, approximately how long can a two-
step process take?
A. 10 days
B. 2 weeks
C. 5-6 weeks
D. 6 months
C. In a squeeze out scenario, the entire process can be completed much
quicker than in a one-step merger. If the requisite level of shares are tendered,
the merger becomes effective shortly afterward (e.g., the same day or within a
couple of days). In total, the transaction can be completed in as few as five
weeks.
Assuming all else being equal, if a company with a P/E of 12x acquires a
company with a P/E of 15x in an all stock deal, the transaction is ______?
A. Accretive
B. Dilutive
C. Breakeven
D. Cannot be determined
B. In an all-stock deal, if an acquirer has a lower P/E than the seller, the deal is
dilutive.
Which of the following are common types of synergies realized in M&A
transactions?
I. Merger
II. Revenue
III. Cost
IV. Stock
A. I and II
B. II and III
C. III and IV
D. II, III, and IV
