Which one of the following is not one of the steps in the M&A model building process?
A. Valuing the acquirer and the target firms as standalone businesses
B. Valuing the target and acquiring firms including synergy
C. Determining the initial offer price for the target firm
D. Establishing search criteria for the potential target firm
E. Determining the combined firm's ability to finance the transaction.
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What happens to the outstanding shares of the target firm when the acquirer purchases 100% of the target's outstanding stock?
A. They are added to the number of shares of Acquirer stock outstanding
B. They are cancelled.
C. They are converted into preferred stock.
D. They are shown as treasury stock on the books of the combined companies.
E. They are swapped for debt in the new company.
Acquiring Corp agrees to buy 100% of the outstanding shares of Target Corp in a share for share exchange. How would Acquiring Corp determine how many new share of its stock it would have to issue?
A. Multiply the purchase price premium paid for Target’s stock by the number of shares of target stock outstanding.
B. Multiply the share exchange ratio by the number of Acquirer shares outstanding.
C. Add the number of Acquirer and Target shares outstanding
D. Multiply the share exchange ratio by the number of Target shares outstanding.
E. Divide the share exchange ratio by the purchase price premium
The share exchange ratio is defined as
A. Offer price for the target divided by the acquirer's share price
B. Offer price for the target divided by the target's share price
C. Acquirer's share price divided by the target's share price
D. Target's share price divided by the offer price
E. Acquirer's share price divided by the offer price
The initial offer price for the target firm is defined as
A. The minimum price
B. The present value of the minimum price plus some fraction of the present value of net synergy
C. The present value of net synergy plus the current market value of the target firm
D. The maximum price less the minimum price
E. The maximum price less the present value of net synergy
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