Answer = c: Horizontal mergers involve companies selling similar products and services.
Synergy values are the additional values that companies realize through a merger and acquisition. Synergy values can take three forms. Generally speaking, the most significant and common form of synergy is:
Higher Cost of Capital
Answer = b: Most mergers create value by simply reducing redundancies in the combined cost structure of the newly formed company.
Once a company completes the Pre-Acquisition Review, the next phase within the merger and acquisition process is to:
Search and screen target companies
Answer = a: Once a company makes a decision to pursue a merger for growing the company, the next step would be to research likely candidates or targeted companies.
Many mergers begin through a series of negotiations between the two companies. If the two companies decide to seriously investigate the possibility of a merger, they will launch Phase II Due Diligence and execute a:
Post Merger Contract
Formal Joint Conference
Merger & Acquisition Agreement
Letter of Intent
Answer = d: The two companies should sign a Letter of Intent to officially initiate a stronger level of due diligence before moving to the next phase in the merger and acquisition process.
Either party in a merger and acquisition may be entitled to indemnification because of a significant misrepresentation. Indemnification is usually not due until a certain threshold has been reached. This threshold amount is often called the:
Reciprocal Amount
