Series 79 M&A process questions || Already Passed.
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Course
Series 79 M&A
Institution
Series 79 M&A
Which 3 parties would a sell-side advisor meet with when conducting due diligence? Which party would the sell-side advisor NOT meet with? correct answers WOULD meet with:
-Auditors, consultants, company management
WOULD NOT meet with:
-The company's customers
Which is a ratio that a sell-side...
Series 79 M&A process questions || Already Passed.
Which 3 parties would a sell-side advisor meet with when conducting due diligence? Which
party would the sell-side advisor NOT meet with? correct answers WOULD meet with:
-Auditors, consultants, company management
WOULD NOT meet with:
-The company's customers
Which is a ratio that a sell-side advisor would generally not be concerned with when determining
an appropriate valuation? correct answers Dividend payout ratio (b/c the company is being sold)
What type of buyer would a target company approach if it seeks cash to fund growth and wants
to partially liquidate? correct answers A private equity firm
What type of lender is a good option for a company with a strong balance sheet and no debt?
correct answers An asset backed lender
What are 3 good options for a business owner seeking liquidation on retirement? What is a BAD
option to achieve these goals? correct answers GOOD options
-dividend recap
-An IPO
-Company sale to strategic buyer
BAD option
-Acquisition or "bolt-on"
What is a good option for major shareholders that want to create liquidity and avoid dilution?
correct answers A dividend recap
What are 6 key M&A documents during the first round of bidding? correct answers -Engagement
letter (signed by client and bank)
-Teaser (sent out by bank to perspective buyers)
-Confidentiality agreement
-Confidential information memorandum (CIM)
-Initial procedures letter
-First-round bid (a non-binding bid)
What is the CIM? correct answers -Confidential Information Memorandum
-A 50-60 page document providing significant information about the target, its industry and the
investment opportunity
What is the primary role of the sell side adviser? correct answers To provide a comprehensive
valuation analysis
Which side offers stapled financing?
To whom does this side typically offer stapled financing?
What risk does this stapled financing reduce? correct answers -The sell side adviser
Would the buy side adviser be tasked with hiring a PR firm to announce the deal? correct
answers No
Which side would be expected to conduct due diligence outside the scope of the provided
documents? correct answers The buy side adviser
Are companies likely to provide updated financial statements to buy side advisers along the way?
What would likely happen if the target has a clause disclosing that it does not plan on providing
updated financials when it provides it's initial financials to the buy side adviser? correct answers
-Yes, especially if the process drags on
-The adviser could still accept the initial financials but would likely reject the clause
What are two examples of pro forma EBITDA adjustments correct answers -Non-essential
employee wages
-Large executive bonuses that were paid out in previous years but will not be necessary in the
future
What does the buyer benefit from in an asset purchase? correct answers A step-up of the tax
basis
In an LBO valuation, what ratio will probably be least useful? correct answers Current
debt/capitalization ratios (b/c capital structure will be totally re-done)
What are two good metrics for an attractive LBO target? correct answers -A high annual
EBITDA
-Low interest expense
If a company wants cash to fund growth and to partially liquidate, what type of buyer would it
approach? correct answers A private equity firm
Which type of analysis would a buy side adviser be more likely to use when evaluating the
potential acquisition of a private company?
-LBO analysis
OR
-Comparable companies analysis correct answers LBO Analysis
Which would have a smaller impact on day to day company operations?
-Dividend recap OR sale of the company correct answers -Dividend recap
A company is interested in raising capital for expansion and subsequently selling to a strategic
buyer, who would it approach to begin this process?
-a bank
-a private equity fund
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