Mergers & Acquisitions Quiz # 1

15 Questions | Total Attempts: 2386

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Mergers & Acquisitions Quiz # 1

The following quiz covers all the content covered through the first four classroom sessions. The quiz is NOT an open book examination; please abide by the NYU code of ethics. Quiz Format: * 15 questions * Timed * Needs to be completed before November 5, 2009 at 4:00PM


Questions and Answers
  • 1. 
    Bas, CEO of Ignacio Auto & Body Shop, a Lower Manhattan-based automobile repair shop, is seeking to grow his business.  Bas' main competitor Alvaro's Awesome Autos, is based in upper Manhattan. After a long day of due diligence and negotiation they agree that if they combine their businesses they'll enjoy significant synergies.  How would you best describe the combination of the businesses?   
    • A. 

      Geographic footprint expansion

    • B. 

      Merger

    • C. 

      Reverse morris trust

    • D. 

      All of the above

  • 2. 
    Why do corporations acquire other corporations?
    • A. 

      Strengthen brand

    • B. 

      Cost synergies

    • C. 

      Operating synergies

    • D. 

      Improvements to human capital

    • E. 

      All of the above

  • 3. 
    Michael Porter believes the significant synergy corporations gain through mergers and acquisitions is:
    • A. 

      Tax savings

    • B. 

      Brand enhancement

    • C. 

      Product extensions

    • D. 

      Human capital

    • E. 

      All of the above

  • 4. 
    Medeiros Burgers and Arepas is a local 2-unit quick service restaurant. It's owner, Phoebe Medeiros, bought the business from her mother using a $5 million bank loan.  Despite enjoying a long list of customers and rave reviews about it's best burgers and arepas, the business is struggling to pay its interest expense. Last week, Phoebe received an offer letter to sell to McDonald's, a large publicly traded corporation.  The offer letter highlighted several reasons for an acquisition, but the most prominent was it's weighted cost of cost of debt.With all else being equal, what would be the impact to Medeiros Burgers and Arepas' profitability:
    • A. 

      Decreased profitability

    • B. 

      Increased profitability

    • C. 

      No change to profitability

  • 5. 
    "Glamour acquisitions" are generally
    • A. 

      That result in above-average results

    • B. 

      That result in below-average results

    • C. 

      That result in average results

  • 6. 
    What are some methods corporations and analysts use to measure the success of an acquisition:
    • A. 

      Internal rate of return

    • B. 

      Return on investment

    • C. 

      Cash on cash return

    • D. 

      Net present value

    • E. 

      All of the above

  • 7. 
    M&A strategy is said to be a 3-legged stool. "Strategy" and "Objectives" are two of the three legs of the stool.  What's the third?
    • A. 

      Cash flow

    • B. 

      Multiple arbitrage

    • C. 

      Mission

    • D. 

      Growth

    • E. 

      All of the above

  • 8. 
    Private equity professionals boil mergers and acquisitions strategies down into three "plays".  "Growth" and "Multiple Arbitrage" are two of the three strategies, what is the third?
    • A. 

      Human capital improvement

    • B. 

      Technology enhancement

    • C. 

      Organic growth

    • D. 

      Cash flow

    • E. 

      Capital expenditure

  • 9. 
    Goldman Sachs, a publicly traded company, closed its last fiscal year with an P/E ratio of 5.00.  Credit Suisse, a publicly traded company, closed its last fiscal year with an P/E ratio of 4.00.  Goldman plans to acquire Credit Suisse.  Will the acquisition be accretive, dilutive or neutral for Goldman Sachs?
    • A. 

      Accretive

    • B. 

      Dilutive

    • C. 

      Neutral

  • 10. 
    Identify a barrier of entry:
    • A. 

      Experience

    • B. 

      Licensing

    • C. 

      Equipment

    • D. 

      Geography

    • E. 

      All of the above

  • 11. 
    What is a bear hug letter?
    • A. 

      A letter from the target to the aquiror outlining all of the positive effects that would result from an acquisition between the two companies and threatening a hostile takeover

    • B. 

      A letter from the target to the acquiror outlining all of the negative effects that would result from an acquisition between the two companies

    • C. 

      A letter from the acquiror to the target outlining all of the positive effects that would result from an acquisition between the two companies and threatening a hostile takeover

    • D. 

      A letter from the acquiror to the target outlining all of the negative effects that would result from an acquisition between the two companies

  • 12. 
    What is enterprise value?
    • A. 

      Enterprise value is calculated as minority interest and preferred shares, minus total cash and cash equivalents.

    • B. 

      Enterprise value is calculated as market cap plus debt, minority interest less preferred shares, minus total cash and cash equivalents.

    • C. 

      Enterprise value is calculated as market cap plus debt, minority interest and preferred shares

    • D. 

      Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

    • E. 

      Enterprise value is calculated as market cap plus debt

  • 13. 
    You're on the buyside.  You receive and offer to acquire a company; the company sends you its projections, which you instantly deem to be aggressive.  Management has projected its COGS margin 40% of sales.  What are you inclined to do, in terms of your internal estimates in your underwriting model?
    • A. 

      Increase margin

    • B. 

      Decrease margin

    • C. 

      Keep margin flat with management projections

  • 14. 
    Warren buffet claims the most important characteristic for an M&A practitioner is:
    • A. 

      Pragmatism

    • B. 

      Optimism

    • C. 

      Skeptism

    • D. 

      Agnosticism

    • E. 

      All of the above

  • 15. 
    Corporations that grow through buying other corporations are growing via which of the below strategies:
    • A. 

      Organic

    • B. 

      Acquisition

    • C. 

      Divestiture

    • D. 

      Spin-out

    • E. 

      All of the above

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