Deck 2: Precedent Transactions Analysis

Question 1

When may a Schedule 13E-3 be issued?

A)In a tender offer
B)In a one-step merger transaction
C)When a public acquirer issues shares as part of the purchase consideration of a public target
D)In a leveraged buyout of a public company

Answer 1

D

Question 2

Calculate the offer price per share for a company in an all-cash transaction given the following information.

Transaction Details:
Cash offer price: $300.00mm
Shares outstanding: 5.00mm
Current share price $30.00

A)$60.00
B)$10.00
C)$6.00
D)$30.00

Answer 2

$60.00

Question 3

What is the correct order for a precedent transaction analysis? E.Select the universe of comparable acquisitions
F)Benchmark the comparable acquisitions
G)Locate the necessary deal-related and financial information
H)Spread key statistics, ratios, and transaction multiples
I)Determine valuation

A)E, H, F, G, I
B)E, G, H, F, I
C)I, H, G, E, F
D)F, G, H, I, E

Answer 3

B

Question 4

Which of the following choices is NOT a primary type of purchase consideration for a target's equity?

A)All-cash
B)Stock-for-Stock
C)Cash/stock mix
D)All-debt

Question 5

Which kind of buyer generally pays the most for an acquisition?

A)Financial buyer
B)Strategic buyer
C)Private equity
D)Financial sponsor

Question 6

What situation would generally result in a lower purchase price of a company?

A)The seller is in need of cash and is selling a non-core business
B)The target company is shopped to prospective buyers through an auction
C)The target company is seeking alternatives to a hostile bid
D)The buyer seeks to create synergies

Question 7

Calculate the offer price per share given the following details:

Transaction Details:
AcquirerCo agreed to buy TargetCo with a mix of cash and AcquirerCo stock.TargetCo stockholders will receive $5.00 in cash and one share of AcquirerCo common stock for every two shares of TargetCo stock.AcquirerCo's share price closed at $30.00 a day prior to the announcement.

A)$15.00
B)$35.00
C)$25.00
D)$20.00

Question 8

What is NOT a reason why transaction comps generally provide a higher multiple range than trading comps?

A)Buyers pay control premiums
B)Buyers often have the opportunity to realize synergies
C)Buyers receive the right to control decisions
D)Transaction comps are more accurate than trading comps

Question 9

Calculate the equity value in a fixed exchange ratio structure given the following information.

Transaction Details:
TargetCo's shareholders will receive one share of AcquirerCo's common stock for every four shares of TargetCo's common stock.AcquirerCo's share price prior to the announcement was $20.00.TargetCo has 25 million shares outstanding.

A)$125.0mm
B)$100.0mm
C)$80.0mm
D)$50.0mm

Question 10

Given the following information, calculate the EBITDA multiple that includes synergies.

Details:
Enterprise Value: $3,500.0
EBIT: $425.0
Depreciation and Amortization: $25.0
COGS: $500.0
Synergies: $50.0

A)3.5x
B)8x
C)14x
D)7x

Question 11

A ratio that defines how many shares of the acquirer's stock are exchanged for each share of the target's stock is referred to as a:

A)Fixed exchange ratio
B)Secure exchange ratio
C)Floating exchange ratio
D)Stock-for-stock ratio

Question 12

Which form of consideration typically triggers a taxable event?

A)All-cash
B)Stock-for-Stock
C)Cash/stock mix
D)None

Question 13

Which structure generally gives greater certainty to the target's shareholders in terms of value received?

A)Floating exchange ratio
B)Fixed exchange ratio
C)They both are the same
D)It depends on the terms

Question 14

Calculate the percentage of premium paid given the following details:

Details:
Although rumors of the transaction leaked out yesterday, AcquirerCo officially announced today that it has agreed to buy TargetCo for $25.00 a share.TargetCo shares closed higher yesterday at $20.00.

A)25%
B)20%
C)15%
D)Not enough information

Question 15

How is the equity value calculated for an M&A transaction when the target company is private?

A)Share price multiplied by shares outstanding
B)Acquirer's price per share multiplied by shares outstanding
C)Enterprise value less assumed/refinanced net debt
D)There is no equity value for a private company

Question 16

Calculate the equity value for a public target in a precedent transactions analysis given the following information.

Details:
Share price: $20.00
Acquirer's offer price per share: $40.00
Fully diluted shares outstanding: 100.00mm

A)$200.00mm
B)$400.00mm
C)$150.00mm
D)$250.00mm

Question 17

Calculate the fixed exchange ratio based on the following transaction details.

Transaction Details:
AcquirerCo agrees to purchase TargetCo in an all-stock transaction valued at $2.0 billion.TargetCo's shareholders will receive one share of AcquirerCo's stock for every four shares of TargetCo stock they own.

A)4
B).25
C)1.00
D).5

Question 18

All of the following are weaknesses of a precedent transactions analysis EXCEPT:

A)Multiples may be skewed, depending on the economic environment
B)Precedent transactions by definition have occurred in the past, and may not be reflective of the current environment
C)A precedent transactions analysis makes too many assumptions about future performance
D)Information may be insufficient to determine transaction multiples for many comparable acquisitions.

Question 19

Determine the type of exchange ratio in the following Stock-for-Stock transaction.

Transaction Details:
AcquirerCo will acquire TargetCo for stock.TargetCo stockholders will receive $40.00 of AcquirerCo's common stock for each share of TargetCo common stock they hold.

A)Fixed exchange ratio
B)Secure exchange ratio
C)Floating exchange ratio
D)Linear exchange ratio

Question 20

Calculate the percentage of premium paid given the following details.

Details:
AcquirerCo officially announced today that it has agreed to buy TargetCo for $35 a share.TargetCo shares closed yesterday at $20.00.

A)75%
B)175%
C)42%
D)35%

Question 21

In a floating ratio structure, the number of shares exchanged fluctuates in accordance with which of the following?

A)Movement of the acquirer's share price
B)Movement of the target's share price
C)Market movement
D)Sector movement

Question 22

Which of the following is true regarding the number of the acquirer's shares exchanged in a fixed exchange ratio structure?

A)It remains constant
B)It goes up
C)It fluctuates
D)It goes down

Question 23

The use of stock as a meaningful portion of a transaction generally leads to a:

A)Higher valuation
B)Lower valuation
C)Higher multiple
D)It depends

Question 24

In which document can one find recommendation from the target's board of directors on how shareholders should respond to a tender offer?

A)8-K
B)Schedule 13E-3
C)10-Q
D)Schedule 14D-9

Question 25

Which form contains relevant data for an LBO in a private transaction involving non-public financing?

A)S-4
B)8-K
C)13E-3
D)None of the above

Question 26

When performing a precedent transaction analysis, in what scenario would information be found in an S-4 if the target was private in an LBO?

A)When non-public financing is used
B)When public debt securities are issued
C)If the acquisition is over $1,000.0m
D)There is never information on a private transaction

Question 27

In which scenario must the equity value be grossed up to calculate the implied equity value?

A)The target is a private company
B)The acquirer is a private company
C)The acquirer purchases less than 100% of outstanding shares
D)The acquirer purchases all outstanding shares

Question 28

What situation would lead to a higher purchase price for a company?

A)Merger of equals
B)Targeted auction
C)Hostile situation
D)Private equity deal