Imperial College

BUSI97058 - M&A

In-class examination – 2023

30 minutes

NAME MARK /100

Mid course exam - Multiple choice questions - MOCK

Write your answers on this sheet.

A right answer is +5 marks,

A wrong answer is 0 marks,
A non answer is 0 marks,

Please circle the best answer.

1. a b c d e
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MOCK

1. Whenever there is a value gap in a public company, there is an opportunity…

1. for the management to sell the company

2. for the competitors to capture the clients
3. for the market to acquire the company and close the gap
4. b and c
5. a and c

2. (B8) What are the three main drivers of value creation in acquisitions?

a. Competencies, assets and relationships

b. Assets, brand and capital
c. Assets and liabilities
d. Assets, processes and regulation
e. None of the above

3. (B15) While we may not have yet discussed that specific point, you may want to give it a go using your
good judgment: When top managers implement anti-takeover measures to protect their positions against
outside challenges, this is called:

a. Best business practices

b. Focus on shareholder value
c. Golden parachute
d. Managerial entrenchment
e. Greenmail

4. Increased economic efficiency may be due to:

a. improved Management
b. operating synergies such as economies of scale, scope or those arising in vertical integration
c. diversification resulting in lower labour costs, reduced risk for large shareholders, salvaging of
nontransferable ssets
d. gains from financial synergies through the creation of an Internal capital market or the
possibility of higher leverage
e. All the proposed answers are valid

5. (Acerta Pharma Case) What would best characterize the $4 billion price paid by AZ for the enterprise
value of Acerta Pharma?

a. The price was overly inflated since Acerta Pharma was far from being profitable
b. The price was too high considering there was already an incumbent drug in the market
c. The price was attractive considering J&J owned the US market while AZ would dominate the
European markets
d. The price was attractive considering the expected positive outcome of the clinical trials
e. The price was low considering Acerta’s drug was going to remove the competition

6. In our “Three active acquirers” case study, all three companies…

a. Accumulate losses
b. Destroy value
c. Play EPS momentum
d. b and c
e. a, b and c

7. Merger waves often reflect underlying

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a. economic changes
b. changes in the legal and regulatory environment
c. technological changes
d. All the proposed answers are valid
e. None of the above

8. The objective of competition/antitrust policy is to protect competition (US), or businesses and

consumers/citizens (EU) by:

a. Fighting unfair or abusive conduct on the part of firms,

b. Preventing the build-up of firms with dominant positions through M&A activity or anticompetitive
practices
c. Dismantling monopolies which use anticompetitive practices to maintain their positions
d. a and b
e. a, b and c

9. As an investor, in which case(s) will you want to hire external advisors to perform a commercial due
diligence?

a. There is no debt in the financing, therefore all the risk is concentrated in the equity.
b. There is not enough debt to cover all your equity investment
c. There will be significant amount of debt in the financing
d. The ratio of debt to equity will be difficult to forecast
e. None of the proposed answers are valid

10. “IM” in M&A commonly refers to

a. Intent Mail
b. Information Memorandum
c. Intelligence Method
d. “I am [the highest bidder]”
e. Immediate Move

11. Between signing and completion,

a. Both the buyer and seller jointly own the company

b. A third-party administrator holds the company in escrow
c. Buyer starts to legally own the company
d. Seller continues to legally own the company
e. There is generally no clear legal ownership of the company

12. In order to generate deals, one would not typically

a. Conduct sub sector research

b. Prepare a data room for due diligence
c. Publicly announce an interest for acquisitions
d. Connect with intermediaries
e. Reach out to prospective targets directly

13. A hostile approach is one which…

1. Is not welcomed by the employees, the clients and the suppliers

2. Is not welcomed by the shareholders
3. Is not welcomed by the regulators
4. Is not welcomed by management
5. Is not welcomed by the market

14. (P28) If a PE firm contributes $400 million of equity to a company upfront and exits the investment at the
end of year 5 for $1 billion, what is the IRR?

a. 18.7%
b. 19.5%
c. 20.1%

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d. 25.7%
e. 26.7%

15. (Three Active Acquirers case) What investment strategy are the “Three Acquirers” pursuing?

a. Equity cash flow momentum management

b. Feedback loop momentum
c. Reverse bootstrapping
d. EPS momentum management
e. EVA momentum management

16. (P31) The main reason to provide a “dataroom” during the due diligence process is

a. Deal fairly and efficiently with multiple potential investors

b. Prevent the potential investors from finding too much about the target company
c. Provide a quiet space for work and ensure the junior auditors or advisors don’t get distracted
d. All the proposed answers are valid
e. None of the proposed answers are valid

17. (P32) the main objective of the commercial due diligence is to

a. Investigate the financial accounts

b. Assess the validity of the cash flow projections
c. Uncover legal liabilities
d. Check the history of the management team
e. All the proposed answers are valid

18. (P34) What are the key variables for sensitivity analysis performed in LBO analysis?

a. Purchase price, financing structure and historical dividends

b. Purchase price, financing structure and exit multiple
c. Financing structure and historical dividends
d. Financing structure and exit multiple
e. Purchase price and historical dividends

19. (P36) Under what circumstances might a strategic buyer use LBO analysis?

a. To determine the debt capacity of their company

b. To determine the price a financial sponsor can afford to pay
c. To help spread comparable company analysis
d. To improve their compliance from the perspective of the regulator
e. Strategic buyers would not use LBO analysis

20. How much senior debt can be reasonably put on a company for a large LBO (on average)?

a. None
b. Between 1x and 2x Ebitda
c. Between 2x and 6x Ebitda
d. Between 7x and 11x Ebitda
e. More than 11x Ebitda