Question

5. Which of the following statements regarding Mergers and Acquisition processes is false?

a) Buyer and seller have diverging interests

b) The agreed price is established by a third party who acts as an intermediary between buyer and seller

c) The due diligence process enables the potential buyer to evaluate the target company

d) All transaction terms and conditions are reflected in legal documentation

6. Which of the following statements regarding Mergers and Acquisition transaction structures are false?

a) The consideration payable to the seller can include several components

b) The consideration payable to the seller can only include one component, either cash or shares

c) The buyer always retains a fraction of the payable consideration to cover for future unexpected issues

d) The seller provides the buyer with representations and warranties which are deemed to offer some additional comfort about the status of the target company

7. As the CEO of the Laurel Group of Hotels, you wish to offer to purchase Hardy Resorts, Inc. You have estimated the value of HHI at USD 250 million and the present value of expected synergies arising from the combination at USD 20 million. What is the maximum price you are willing to offer in a competitive sale process?

a) USD 250 million

b) USD 270 million

c) USD 230 million

d) USD 290 million

Answer 1

5.

Statement A is false.

In a Merger and Acquisition, the buyer and seller need to have a common interest for the synergies to accrue through completion of merger.

If Buyer & Seller have divergent interests, then synergies will not accrue through merger.

Both the remaining statement are true.

Statement B is true, as the agreed price for the merger is established by a third party or Valuers for the transaction who also act as an intermediary between buyer and seller.

Statement C is also true, as due diligence enables the potential buyer to evaluate the target company

Statement D is also true, as it is mandatory that all the terms and conditions of the transaction are reflected in legal documentation