Mergers & Acquisitions (M&A)

Question 1

What is a merger?

Answer 1

A merger occurs when two companies combine to form a new entity.

Question 2

What is an acquisition?

Answer 2

An acquisition occurs when one company purchases another and absorbs it.

Question 3

What is the main difference between a merger and an acquisition?

Answer 3

In a merger, two companies combine to form a new entity; in an acquisition, one company absorbs the other.

Question 4

What are synergies in M&A?

Answer 4

Synergies are financial benefits, such as cost savings or increased revenue, that result from merging or acquiring another company.

Question 5

What is a takeover?

Answer 5

A takeover occurs when one company seeks to acquire control of another company by purchasing a majority stake.

Question 6

What is the difference between a friendly and a hostile takeover?

Answer 6

In a friendly takeover, the target company’s management agrees to the acquisition, while in a hostile takeover, the acquisition occurs without management’s consent.

Question 7

What is a horizontal merger?

Answer 7

A horizontal merger occurs between companies in the same industry, often competitors.

Question 8

What is a vertical merger?

Answer 8

A vertical merger occurs between companies at different stages of the supply chain within the same industry.

Question 9

What is a conglomerate merger?

Answer 9

A conglomerate merger occurs between companies in unrelated industries.

Question 10

What is a market-extension merger?

Answer 10

A market-extension merger occurs between companies in the same industry but in different geographic regions.

Question 11

What is a product-extension merger?

Answer 11

A product-extension merger occurs between companies that offer complementary products in the same market.

Question 12

What are some common motivations for M&A?

Answer 12

Common motivations include growth, economies of scale, diversification, market power, and tax benefits.

Question 13

What is the main goal of a market-extension merger?

Answer 13

To expand into new geographic markets and increase the customer base.

Question 14

How does M&A lead to economies of scale?

Answer 14

M&A can reduce per-unit costs by increasing production and streamlining operations.

Question 15

What is due diligence in the M&A process?

Answer 15

Due diligence is the investigation of a target company’s financial health, operations, and legal standing to assess risks before acquisition.

Question 16

What happens during the valuation and pricing stage of M&A?

Answer 16

The acquiring company determines the value of the target company using methods like DCF analysis, Comps, and Precedent Transactions.

Question 17

What is the purpose of deal structuring in M&A?

Answer 17

Deal structuring involves negotiating the terms of the deal, including how the acquisition will be paid for (cash, stock, or a combination).

Question 18

What is integration in the M&A process?

Answer 18

Integration is the process of combining the operations, cultures, and systems of both companies after the deal is completed.

Question 19

What are the three main methods of payment in M&A?

Answer 19

The three main methods are cash payment, stock swap, and a combination of cash and stock.

Question 20

What is a cash payment in M&A?

Answer 20

A cash payment is when the acquiring company pays the target company’s shareholders in cash for their shares.

Question 21

What is a stock swap in M&A?

Answer 21

A stock swap is when the acquiring company offers its shares in exchange for the target company’s shares.

Question 22

What are antitrust laws?

Answer 22

Antitrust laws prevent monopolies and maintain competition, ensuring that M&A transactions do not unfairly reduce competition.

Question 23

What is the role of the SEC in M&A?

Answer 23

The SEC ensures transparency and regulatory compliance in M&A transactions involving publicly traded companies.

Question 24

What is a cross-border merger?

Answer 24

A cross-border merger involves companies from different countries, requiring compliance with regulations in multiple jurisdictions.

Question 25

What are common post-merger challenges?

Answer 25

Post-merger challenges include cultural integration, operational integration, and talent retention.

Question 26

Why is cultural integration important after a merger?

Answer 26

Cultural integration is crucial for employee satisfaction and the long-term success of the combined company.

Question 27

What is operational integration in M&A?

Answer 27

Operational integration involves combining business processes, IT systems, and operational strategies after the merger.