Answers to Final Exams



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Answers-to-Final-Exams
Answer = c: Horizontal mergers involve companies selling similar products and services.

  1. 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:

      1. Higher Cost of Capital

      2. Lower Expenses and Cost

      3. Higher Production Efficiencies

      4. Lower Cost of Capital

Answer = b: Most mergers create value by simply reducing redundancies in the combined cost structure of the newly formed company.

  1. Once a company completes the Pre-Acquisition Review, the next phase within the merger and acquisition process is to:

        1. Search and screen target companies

        2. Integrate the two companies

        3. Initiate Phase II Due Diligence

        4. Execute a Merger & Acquisition Agreement

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.



  1. 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:

          1. Post Merger Contract

          2. Formal Joint Conference

          3. Merger & Acquisition Agreement

          4. 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.

  1. 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:

    1. Reciprocal Amount

    2. Basket Amount

    3. Striking Price

    4. Closing Rate


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