FIN 461 Exam 1 Questions With Correct answers

FIN /




461 Exam 1 Questions With Correct answers
/ // // // // // //




Reasons /
/M/A /


/occurs /


/in /


/waves //- //CORRECT //ANSWERS(S)✔✔(1) //Liquidity //(Low //interest //Rates, //high //stock //prices) //



(2) //Disruptive //Technology

(3) //Regulation /// //Deregulation

(4) //Price //Shock



Why /
/are /


/regulated /


/industries /


/less //competitive //- //CORRECT //ANSWERS(S)✔✔Set //profit //margins, //lack //of //consumer //care




M/
A/
/Motives //- /


/CORRECT /


/ANSWERS(S)✔✔Synergies, /


/Diversification, /


/strategic, /


/hubris, /


/buy //undervalued/sell //over //valued, //mismanagement, //managerialism, //market //power

,Operational /
/Synergies //- /


/CORRECT //ANSWERS(S)✔✔Cost //savings, //revenue //enhancements, //process //involvements




Financial //Synergies //- //CORRECT //ANSWERS(S)✔✔Financial //engineering, //tax //benefits



How //do //synergies //come //about //- //CORRECT //ANSWERS(S)✔✔Shared //know-
how, /
/shared /


/tangible /


/resources, /


/pooled /


/negotiating /


/power, //coordinated //strategies, //vertical //integration, //combined //business //creation




What //kind //of //synergies //are //more //reliable //- //CORRECT //ANSWERS(S)✔✔Cost //synergies



Why /
/can /


/diversification /


/destroy /


/value //- /


/CORRECT /


/ANSWERS(S)✔✔(1) /


/Inefficient //internal //capital //markets //(lower //cost //of //capital //to //failing //divisions) //



(2) //reduced //managerial //accountability /// //greater //entrenchment

(3) //loss //of //focus

(4) //incentive //problems



What /
/drives //horizontal //integration //- //CORRECT //ANSWERS(S)✔✔economies //of //scale //and //scope

,what /
/drives /


/vertical /


/integration //- /


/CORRECT /


/ANSWERS(S)✔✔greater /


/control //over //production //and //distribution, //can //be //forward //or //backward //integration




LBO //- /
/CORRECT /


/ANSWERS(S)✔✔Acquisition /


/of //a //target //using //debt //to //finance //a //large //portion //of //the //purchase //price




What //are //the //historical //weights //debt //to //equity //for //lbo? //- //CORRECT //ANSWERS(S)✔✔60-
70% //debt //and //30-40% //equity



How /
/does /


/leverage /


/play //


a/
/role /


/in //an //lbo? //- //CORRECT //ANSWERS(S)✔✔(1) //Enables //sponsor //to //achieve //desired //returns //



(2) //tax //savings //due //to //tax //deductibility //of //interest //payments

(3) //some //say //it //also //improves //firm //governance



Types //of //M/A //financing //- //CORRECT //ANSWERS(S)✔✔Cash //on //hand

Debt //financing //

- //revolving //credit //facility

- //term //loan

- //bond /// //note

, - //commercial //paper

Equity //financing //

Contingent //consideration //(earnout)



What //is //a //contingent //consideration /// //earnout //- //CORRECT //ANSWERS(S)✔✔Extra //money //is
//dished //out //to //management //depending //on //how //the //target //performs




Accretive //- //CORRECT //ANSWERS(S)✔✔If //earnings //go //up //as //a //result //of //the //transaction



Dillutive //- //CORRECT //ANSWERS(S)✔✔If //earnings //go //down //as //a //result //of //the //transaction



Main /
/players /


/in /


/an /


/acquisition //- /


/CORRECT /


/ANSWERS(S)✔✔Acquirers, /


/targets, /


/investment /


/banks, /


/lawyers, /


/accountants, /


/proxy //solicitors, //institutional //investors, //hedge //and //PE //funds, //M/A //arbitrageurs




What /
/is //


a/
/proxy /


/solicitor //- /


/CORRECT /


/ANSWERS(S)✔✔Someone //who //tries //to //get //shareholders //to //vote //a //certain //way.