Ch 3 Deck 4

Question 1

The buyers more likely to take advantage of stapled financing are

Answer 1

financial buyers such as private equity funds

Question 2

The buyers less likely to take advantage of stapled financing are

Answer 2

Strategic buyers

Question 3

Sell side first round bidding sell side advisor responsibilities:

Answer 3

Identify and contact group of buyers
distribute teaser
distribute CA
Distribute CIM
Distribute Bidding Procedures
Evaluate bids
Evaluate buyer's ability to pay
Accretion/dilution analysis
social issues
antitrust issues
assist seller in inviting bids to second round
assist seller in notifying unsuccessful bids

Question 4

Sell side First round initial contacts of buyers is usually done

Answer 4

over the phone

Question 5

Sell side CA’s are distributed to

Answer 5

bidders who would like to read the CIM

Question 6

Sell side CIM and bidding procedures can be handed out only after

Answer 6

CA is signed

Question 7

After CIM is distributed

Answer 7

buyers are given several weeks to review CIM

Question 8

buyers may engage buy-side advisers at this point

Answer 8

when reviewing CIM to help them develop a bid

Question 9

Sell side advisor evaluates bids from both

Answer 9

a strategic and a financial perspective

Question 10

Second round bidding sell side advisor responsibilities

Answer 10

• Attends management presentations
• Monitors data room access
• Facilitates visits to the target site
• Provides additional information requested by bidders
• Finalizes and distributes the final bid procedure letter to potential buyers
• Assists in advising on letter of intent
• Receives and analyzes final round bids

Question 11

gives specific instructions on the information that potential bidders must include in their final legally binding, bid

Answer 11

Final bid procedures letter

Question 12

Final bid procedures letter must contain

Answer 12

• the exact dollar amount of the offer
• form of purchase consideration (stock versus cash)
• financing sources
• board of directors approval
• required regulatory approvals
• estimated time until sign and close
• buyer contact information
• statement that the offer is binding

Question 13

In a business acquisition, before the start of due diligence, buyer and seller often sign a

Answer 13

letter of intent (LOI)

Question 14

A letter of intent in a business acquisition includes basic terms including

Answer 14

purchase price
Deal structure
employment agreement
noncompete agreement

Question 15

The only part of an acquisition LOI that is typically binding is the

Answer 15

Confidentiality Clause

Question 16

Steps in sell-side negotiation and deal closing

Answer 16

1. Negotiate with selected bidder or bidders
2. Select winning bidder + negotiate definitive agreement
3. Render a fairness opinion
4. Receive board of director approval of the deal
5. Sign the definitive agreement
6. Obtain regulatory approval
7. Receive shareholder approval
8. Source the funding
9. Deal closes

Question 17

Legally binding contract between buyer and seller

Answer 17

definitive agreement

Question 18

First draft of definitive agreement is usually made by

Answer 18

sell side

Question 19

After buyer receives first draft of definitive agreement, the buy side

Answer 19

adds revisions based on due diligence efforts

Question 20

Definitive Agreement typically includes

Answer 20

a. overview of transaction structure
b. Representations and Warranties including material adverse change (MAC) documents and “market out” clauses
c. Covenants
d. No-shop agreements
e. Closing conditions
f. Termination clauses
g. Indemnification

Question 21

In order for an acquisition to occur through a merger, there needs to be a target shareholder vote

Answer 21

with more than 50% (sometimes higher depending on the corporation) of the target shareholders voting for the acquisition

Question 22

Prior to a vote on a merger it is necessary to send out

Answer 22

a proxy statement describing the transaction

Question 23

Merger processes typically take place over

Answer 23

several months

Question 24

tender offers do not require

Answer 24

a shareholder vote

Question 25

tender offers can typically be completed in

Answer 25

a few weeks