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M&A > M&A Final > Flashcards

M&A Final Flashcards

1
Q

What year did US M&A Deals have the most deals from 2012-2021? And what type had the most?

A

2021, US Domestic

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2
Q

Where are the world’s biggest shipping hubs? Top 2?

A

Asia
Shanghai and Singapore
LA was on the list in 2005, no US companies on the list in 2021

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3
Q

Why the big in M&A deals in 2021?

A

Lower borrowing rate, more cash on hand, stocks exploded

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4
Q

What makes a “US” business?

A

Principle place of business is in the US or place of incorpration

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5
Q

ESG meaning

A

Environmental, Social and Governance

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6
Q

two discreet entities becoming one by “operation of law,” the one assumes all assets and liabilities of the two, a legal combination. Legal combo of two discrete economic entities in which only one survives and by ops of law assumes all the assets and liabilities of both entities

A

Merger

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7
Q

buying assets/liability or buy shares but two companies still remain (no merger law required). The purchase by one economic entity of all or a material part of the shares or assets of another entity where both entities survive the transaction

A

Acquisition

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8
Q

Why do Chinese companies want to list on US stock exchanges?

A

They can get higher share prices

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9
Q

What is not M&A?

A

“greenfield investment, most joint ventures, venture capital, real estate development.

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10
Q

Why M&A

A

acquire new technology
horizontal growth - expand new market/product
vertical integration (chevron, does discovery to retail and everything in between)
geographic growth/expansion
eliminate competitors
inversion for tax purposes
buying for distribution channels, acquire sales network
block a competitor

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11
Q

Rational for M&A

A

1+1 = 3

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12
Q

target entity is public, highly regulated, in M&A deal

A

Public M&A

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13
Q

target entity is private in M&A Deal

A

Private M&A

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14
Q

a defense strategy used by a target firm to prevent or discourage a potential hostile takeover by an acquiring company. Potential targets use this tactic in order to make them look less attractive to the potential acquirer.

A

Poison pill

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15
Q

M&A deal meant to bolster your business strategy

A

Strategic M&A

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16
Q

Goldman sacks wants to buy a cookie company, usually a private equity (“PE”) firm that has established a fund with committed capital to be used for acquisitions. These funds have defined criteria for the types of deals they will pursue. PE firms raise capital from high net worth individuals and institutions such as pension funds and endowments. These firms typically have a track record of successful deals which enables them to raise such capital.

A

Financial M&A

17
Q

Why do so many companies incorporate in Delaware?

A

Delaware law has historically been very favorable for corporations and their board of directors

18
Q

What are two things that are not in a confidentiality agreement?

A

no obligations to negotiate an agreement

no reps and warranties with respect to information provided

19
Q

LOI - important part?

A

statement as to whether the letter or clauses are intended to be legally binding

20
Q

Seller advantages in an asset sale (2)?

Seller disadvantages in an asset sale (3)?

A

Few reps and warranties
Seller can exclude any assets

May require consent from 3rd parties
Seller must procure releases of any security interests affecting the assets
Liabilities remain with the seller

21
Q

Seller advantages (2) and disadvantages (3) of a share sale?

A

Better return for SH and less risk with ensuring clients, supplier and ftes will stay with the company

Company retains all liabilities, part of purchase price may need to be held back, places in escrow, seller may need to comply with restrictions in SH agreement

22
Q

Key Points in Investment Banking Engagement Letter

A 
Fee Arrangement
Exclusivity
Term
Right of Termination & Tail Period
Reimbursable Expense
Covered Transactions
23
Q

If you buy assets, you buy from the ___

If you buy shares, you buy from the _____

A

sub, parent

24
Q

Who is liable for leans and environmental liabilities?

A

PIP - person in position, the buyer

25
Q

when one company sells all its assets to another company, and who does this usually concern

A

bulk sale, Creditors are concerned because usually credit is issued based on assets. Required by law to notice of bulk sale.

26
Q

A ______ is a contract in which an employee agrees not to solicit a company’s clients or customers, for his or her own benefit or for the benefit of a competitor, after leaving the company.

A

non-solicitation agreement

27
Q

Preliminary documentation (3) in M&A?

A

investment banking engagement letter(seller)
confidential agreement/ nda – legally binding, do this before you offer
LOI/MOU (memorandum of understanding)/term sheet / head of agreement- it is legally binding but you have to say it is not legally binding if you want it not to be. Sometimes confidential agreement is withing LOI. At this point you may or may not have a price set.

28
Q

Buyers Objective of M&A vs Sellers objective of M&A?

A

Full guaranty extending years after closing

As is, where is.

29
Q

Two purposes of reps and warrenties?

A

Allocate risk between the parties

Provide a snapshot of the business

30
Q

What are reps and warranties?

A

Statements from the SELLER to the buyer (mostly) about the state of the business.

31
Q

Types of R/Ws

A

Legal, Title and Factual

32
Q

Fancy word for you’ll step in take care of the issue (Pay if I’m sued, or defend)

A

Indemnity

33
Q

Reps and Warranties are disproportionally more important to who?

A

the Buyer

34
Q

4 Functions of acquisition agreement

A

Financial terms
Reps/Warranties
Actions needed to consummate transaction
Allocation of risk

35
Q

What are qualifiers (substantive limitations) in R&W?

A

To the best of my knowledge, materiality, time limits

36
Q

Seller’s weapons in from R/W?

A

Exclusive remedy through indemnification (no breach of contract or warrenty)
Timeframe
Threshold, collar, basket, cap
Actual knowledge

37
Q

As you are aware, there are several different approaches to determine the fair market value of a business enterprise:

A

Market Value Approach, Cost Value and Income Value
RMB1.6 billion (approximately US$240 million at the current exchange rate of US$1=RMB6.65) and RMB2 billion (approximately US$300 million).

M&A (6 decks)

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