Mergers and Acquisitions Final
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Course Introduction
This course provides an in-depth exploration of the strategic, financial, and legal aspects of mergers and acquisitions (M&A). Students will learn about the motives behind company consolidations, deal structuring, valuation techniques, due diligence processes, negotiation strategies, and post-merger integration. The course also examines the regulatory environment, corporate governance issues, and the impact of M&A activities on stakeholders. Through case studies and real-world examples, students will develop practical skills to analyze and manage M&A transactions in a global business environment.
Recommended Textbook Mergers Acquisitions and Corporate Restructurings 6th Edition by Patrick A. Gaughan
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16 Chapters
294 Verified Questions
294 Flashcards
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Chapter 1: Introduction
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Sample Questions
Q1) SPACs have not been popular since the 1990s.
A)True
B)False
Answer: False
Q2) A letter of intent:
A)Is legally required in all U.S.deals
B)Sets for more detailed terms than a term sheet
C)Is more common in closely held acquisitions
D)None of the above
Answer: B
Q3) Bidders use merger arbitrage as a way of lowering their takeover costs.
A)True
B)False
Answer: False
Q4) Targets can use an asset sell-off to avoid legitimate liabilities.
A)True
B)False
Answer: False
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Chapter 2: History of Mergers
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Sample Questions
Q1) Which of the following merger waves were truly global?
A)First
B)Second
C)Third
D)Fifth
Answer: D
Q2) The first merger wave was significantly curtailed by the Sherman Antitrust Act.
A)True
B)False
Answer: False
Q3) The pattern of acquisitions by Mittal is consistent with:
A)Horizontal deals
B)Regional and not global
C)Conglomerate
D)Emerging market acquirers
E)Both a and d
F)None of the above
Answer: D
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Chapter 3: Legal Framework
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Q1) In Japan tender offers must be kept open for at least 20 calendar days but not more than 60.
A)True
B)False
Answer: True
Q2) Bidders doing a mini-tender offer must file a Schedule TO within 20 business days from when the offer is announced.
A)True
B)False
Answer: False
Q3) In India, bidders who acquire what percent of a target's stock must disclose that holding within two days of attaining it?
A)5%
B)2%
C)10%
D)51%
E)Such disclosure is not required in India
Answer: A
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5
Chapter 4: Merger Strategy
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Q1) The process of consolidation of fragmented industries is referred to as:
A)Synergistic deals
B)Roll-ups
C)Vertical integration
D)None of the above
Q2) Both Eckbo and Stillman found:
A)No negative shareholder responses from competitors to horizontal deals
B)Significant negative effects
C)The shareholder wealth effects were delayed and occurred one to two years later
D)None of the above
Q3) Schipper and Thompson found positive stock market announcement effects from diversification acquisition programs in the 1960s.
A)True
B)False
Q4) United Airlines' merger with Continental Airlines is an example of:
A)Vertical integration
B)Conglomerate formation
C)Horizontal integration
D)None of the above
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Chapter 5: Antitakeover Measures
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Q1) The Georgeson studies showed that pill-protected companies had reduced shareholder values.
A)True
B)False
Q2) Which of the following are usually considered preventative antitakeover measures?
A)Greenmail
B)Poison pills
C)Tender offers
D)All of the above
Q3) Research shows that changing the state of incorporation:
A)Had no significant shareholder wealth effects
B)Resulted in increased shareholder wealth effects
C)Resulted in decreased shareholder wealth effects
D)None of the above
Q4) Goldsmith was able to circumvent this particular Crown-Zellerbach defense by:
A)Poison pill
B)Greenmail
C)Corporate charter amendment
D)None of the above
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Chapter 6: Takeover Tactics
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Q1) The target will generally pay the insurgent's costs of a proxy fight even if the fight is not successful.
A)True
B)False
Q2) Bris found that toe holds were used in what percent of the tender offers he examined?
A)30%
B)75%
C)15%
D)Nearly 100%
Q3) Betton and Eckbo found out that toe holds are associated with higher tender offer premiums.
A)True
B)False
Q4) In the United States, once accumulating 5% or more of a target's shares the bidder must file a Schedule 13D within:
A)5 days
B)10 days
C)20 days
D)None of the above
Page 8
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Chapter 7: Hedge Funds As Activist Investors
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Q1) Which of the following is true?
A)Hedge funds tend to facilitate more M&As
B)Hedge funds tend to have a dampening effect on M&As
C)Hedge funds are neutral as it relates to M&A activity
D)None of the above
Q2) Which of the following are examples of factors that facilitated the growth of activist hedge funds over the years 2012-2015?
A)Rising stock market
B)High cash balances of U.S.companies
C)Growth of the U.S.economy
D)All of the above
Q3) Research, such as the work of Greenwood and Schoar, found that financial performance of companies improve after activists establish stock positions in the firms.
A)True
B)False
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Chapter 8: Going-Private Transactions and Leveraged Buyouts
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Sample Questions
Q1) The first LBOs occurred in the fourth merger wave.
A)True
B)False
Q2) Kaplan found that the tax benefits in LBOs were:
A)Predictable
B)Built into the takeover premium
C)Did not affect the premium
D)Both a and c
E)Both a and b
Q3) Kaplan found that the post-buyout investors did not enjoy the tax-related benefits of LBOs.
A)True
B)False
Q4) Which of the following is true of senior debt?
A)The rate on senior debt is 2% to 3% above prime
B)Senior debt is usually about a quarter to a third of total LBO debt
C)The term is usually 5 to 10 years
D)All of the above
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Chapter 9: The Private Equity Market
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Sample Questions
Q1) Private equity firms used to be referred to as LBO firms.
A)True
B)False
Q2) Which of the following is a way that private equity firms can extract money from the targets they take over:
A)LBOs
B)Dividend recapitalizations
C)Additional acquisitions
D)All of the above
E)None of the above
Q3) Glode and Green theorize that the findings of Kaplan and Schoar may be due to insufficient disclosure by private equity firms.
A)True
B)False
Q4) Carried interest refers to the gains on transactions by private equity firms.
A)True
B)False
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11
Chapter 10: The Junk Bond and the Leveraged Loan Market and
Stapled Financing
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Q1) Which of the following investment banks refused to participate in the junk bond market?
A)Drexel Burnham Lambert
B)Goldman Sachs
C)First Boston
D)Merrill Lynch
E)None of the above
True or False
Q2) Witmore's research implied that the Asquith et al.study may have greatly overestimated the risk of high yield bonds.
A)True
B)False
Q3) The collapse of the junk bond market mainly ended the use of original issue high-yield bonds in the decades that followed.
A)True
B)False
Q4) The original issue high-yield bond market got its start in the late 1970s.
A)True
B)False
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Chapter 11: Corporate Restructuring
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Sample Questions
Q1) In a spin-off the entity being separated from the parent company often is assigned specific debt attributable to it as part of the sale process.
A)True
B)False
Q2) Which of the following are common reasons cited for selling off prior acquisitions?
A)Poor fit
B)Poor performance
C)Cash flow needs
D)All of the above
E)None of the above
Q3) The sell-offs by Starwood following its acquisition of Taittinger were motivated by:
A)Eliminating a nonstrategic component
B)Eliminating a poorly performing unit
C)Raising cash to pay off debt
D)None of the above
Q4) Cash flow needs motivated the sell-off of Hertz by GM.
A)True
B)False
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Page 13
Chapter 12: Restructuring in Bankruptcy
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Sample Questions
Q1) Andrade and Kaplan found that the causes of financial distress can be traced to:
A)Managerial hubris
B)Financial leverage
C)Nonstrategic deals
D)Diversification
E)Both c and d
Q2) The Crystal Oil Company was the first major prepackaged bankruptcy.
A)True
B)False
Q3) Which of the following are drivers of economic failure?
A)Revenues less than costs
B)Return on investment below costs of capital
C)Profitability below expected levels
D)All of the above
Q4) The initial exclusive period is how many days:
A)90
B)30
C)120
D)None of the above
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Chapter 13: Corporate Governance
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Q1) Lambert and Larker found that the trigger control percentage for activation of golden parachutes agreements was when a bidder acquired approximately 51% of the company outstanding stock.
A)True
B)False
Q2) Malmendier and Tate analyzed the role of CEO overconfidence in the tendency for CEOs to engage in M&As.They measured CEO overconfidence using factors such as the tendency for CEOs to hold options in their company's stock until their expiration.
A)True
B)False
Q3) A study by Core, Holthausen, and Larker, as well as other research, indicates the following characteristics of boards would be desirable:
A)Fewer or no gray directors
B)Fewer inside board members
C)Fewer interlocked directorships
D)All of the above
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Chapter 14: Joint Ventures and Strategic Alliances
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Q1) Chan, Kensinger, Keown, and Martin found positive abnormal returns from strategic alliances.
A)True
B)False
Q2) McConnell and Nantell study showed that shareholders in companies entering into joint ventures enjoyed announcement period returns of -4%.
A)True
B)False
Q3) Research shows that:
A)Techno?logical alliances were more common in high-growth sectors
B)Marketing alliances were more common in mature industries
C)Abnormal returns were negatively correlated with both the size of the alliance partners and their profitability
D)Smaller and less pro table companies seem to have more to gain from strategic alliances
E)All of the above
Q4) Strategic alliances are common in the pharmaceutical industry.
A)True
B)False
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Chapter 15: Valuation
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Sample Questions
Q1) For a company with positive debt:
A)Enterprise value is less then equity value
B)Enterprise value equals equity value
C)Enterprise value is more than equity value
D)None of these
Q2) Continuing value and exit value mean the same thing.
A)True
B)False
Q3) Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!
A)True
B)False
Q4) Which of the following is true:
A)FCF = EBITDA - CE - CWC + CTP
B)FCF = EBITDA - CE - CWC - CTP
C)FCF = EBITDA - CE + CWC + CTP
D)None of these
Q5) Business valuation is as much of an art as it is a science.
A)True
B)False
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Chapter 16: Tax Issues in Mergers & Acquisitions
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Q1) In a Type B Reorganization, the stock purchases must be completed over no longer than:
A)6-month period
B)9-month period
C)12-month period
D)3-month period
E)None of the above
Q2) One advantage of a Type C reorganization is that the bidder does not need to be concerned about the target soliciting its shareholder's approval of the transaction.
A)True
B)False
Q3) Research by Auerbach and Poterba and by Altshuler and Auerbach on tax loss carry forwards indicate that the following tax-related factor may offset the otherwise full value of the target's losses:
A)Failure to achieve synergistic gains
B)Improved research and development
C)Expiration
D)Post-acquisition litigation
E)All of the above
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