Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

M&A > Online Midterm > Flashcards

Online Midterm Flashcards

1
Q

3 schools of ethical thought

A

1) consequences
2) duty or intentions
3) virtues

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Ethical school: consequences

2

A

1) Utilitarianism for society

2) concerns for violation of rights of those not in majority

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Utilitarianism for society, define

A

Greatest good for greatest number of people

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

For ethical school consequences you need to figure out who is…

A

Hurt/helped

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How is the ethical school of thought: consequences evidenced?3

A

1) government policies
2) consumer behavior
3) investor behavior

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Ethical school or thought: Duty or intentions, define

A

Act by rules you require to be applied universally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Duty or intentions: people should be treated as an end not a means

A

Treat people with mutual respect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Ethical school: duty or intentions views profits as a consequence of…

A

Good business practices (rather than goal of business)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Ethical school of thought: virtues define

A

Qualities/values of an actor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Warren Buffett on measuring virtues, what is his quote?

A

Everything you do can be reported on the front page of your local paper

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Economist Milton Friedman in 1962 advocated a stockholder focus creates a clear objective…

A

Increase shareholder wealth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Economist Milton Friedman: increasing shareholder wealth limits…

A

Firm’s social responsibility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Milton Friedman: anything else expropriated wealth/…

A

Threatens existence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

BoD

A

Board of directors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Milton Friedman: price function can be…

A

Impaired

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Economist Milton Friedman: increase in shareholder wealth is a viewpoint consistent with…2

A

Board of directors responsibilities

In US and UK

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Stakeholder viewpoint: Philosopher Edward Freeman in 1984 advocated in addition to stockholders consider…4

A

1) employees
2) customers
3) suppliers
4) the community

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Stakeholder viewpoint Edward Freeman:

BoD, CEO and managers should be aware of…

A

Broader spectrum of parties (stakeholders)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Stakeholder viewpoint Edward Freeman:

Challenging and…

A

Slow decision making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Stakeholder Viewpoint Edward Freeman:

Why does dealing with stakeholders involve challenging and slow decision making?

A

Often not clear at all whose interests dominate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Types of M&A profitability 3

A

1) weak form
2) semistrong form
3) strong form

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

M&A profitability:

Weak form

A

Pafter>Pbefore. Where P= share price

Hard to attribute to transaction but widely used

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

M&A profitability:

Semistrong form

A

%RM&A Firm > %Rbenchmark where R = return on shares

Depends upon using good benchmark and size of sample

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

M&A profitability:

Strong Form

A

%Rfirm w M&A > %Rfirm wo M&A. Where R = return on shares

Good in theory but unobservable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

4 types of research methods Bruner cites with regard to measuring M&A profitability. 4

A

1 event studies
2 accounting studies
3 surveys of executives
4 clinical studies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Research method to measure M&A profitability:

Event studies 4

A

1) abnormal return
2) forward looking price
3) assumptions about efficient stock market
4) direct measure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Abnormal return equation

A

Abnormal return =

raw return - benchmark on announcement day (S&P or CAPM)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Forward looking price = …

A

Forward looking price = PV of future cash flows

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Research method to measure M&A profitability:

Accounting studies 2

A

1) estimated returns of financial reports

2) backward looking

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Accounting studies are credible from…

A

Audited returns

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Accounting studies pose problems when there are…

A

Differences in accounting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Accounting studies measure…

A

Indirectly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Research method to measure M&A profitability:

Surveys of executives 3

A

1) standardized questionnaires
2) insights not otherwise known
3) intimate familiarity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Potential flaws of surveys of executives…2

A

1) may be biased
Or
2) hazy recollection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Accounting studies: drivers of profitability 12 (no need to memorize, refer to next flash cards)

A

1 synergies are important
2 valuing a acquiring pays, glamour doesn’t
3 restructuring pays
4 acquiring market power doesn’t pay
5 using stock is costly, cash is neutral
6 returns vary with time
7 M&A regulation costly
8 Laws/property rights matter in cross border deals
9 M&A just to use cash usually destroys value
10 Tender offers create value for bidders
11 managers have a stake, more value created
12 Announcement of buyer program creates value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Accounting studies: drivers of profitability:

Synergies are…

A

Important

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Accounting studies: drivers of profitability:

Value acquiring…

Glamour…

A

Value acquiring pays

Glamour doesn’t

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Accounting studies: drivers of profitability:

Restructuring…

A

Pays

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Accounting studies: drivers of profitability:

Acquiring market power…

A

Doesn’t pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Accounting studies: drivers of profitability:

Using stock is…

Cash is…

A

Using stock is costly

Cash is neutral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Accounting studies: drivers of profitability:

Returns vary with…

A

Time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Accounting studies: drivers of profitability:

M&A regulation is…

A

Costly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Accounting studies: drivers of profitability:

Laws/property rights matter in…

A

Cross border deals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Accounting studies: drivers of profitability:

M&A just to use cash usually…

A

Destroys value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Accounting studies: drivers of profitability:

Tender offers, what do they do for the bidders?

A

Create value for bidders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Accounting studies: drivers of profitability:

When managers have stake…

A

More value is created

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Accounting studies: drivers of profitability:

Announcements of a buyer program…

A

Creates value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

How many waves were there in M&A history? From what time period?

A

5 waves from 1895 to 2000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

What was the date of wave 1?

A

1895-1904

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

What was the date of wave 2?

A

1925-1929

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

What was the date of wave 3?

A

1965-1970

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

What was the date of wave 4a?

A

1981-1987

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

What was the date of wave 4b?

A

1992-2000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

Wave 1 (1895-1904) how was this wave characterized?

A

Horizontal mergers for market power

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

Wave 1 (1895-1904) Horizontal mergers for market power consisted of overcapacity due to…

A

Technological innovation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

Wave 1 1895-1904

Major companies 5

A 
1 DuPont
2 Standard Oil
3 GE
4 Eastman Kodak
5 US Steel
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

Wave 2 1925-1929, how was this wave characterized…2

A

1 vertical mergers

2 for supply and distribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

Wave 2 was characterized by mergers for the purpose of…

A

Oligopoly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

Wave 2 ended with what legislative act?

A

Clayton Act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

Wave 2, primary industry where these mergers occurred?

A

Public utilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

What ended wave 2?

A

Stock market crash in 1929

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

Wave 3 1965-1970, this wave was characterized by…

A

The rise of the conglomerate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

During wave 3 (1965-1970) regulation limited…

What did this cause?

A

Horizontal mergers

Therefore companies diversified

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
64
Q

Wave 3 (1965-1970) concentrated among…

A

Oil companies/conglomerates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
65
Q

How was the economy/stock market characterized during wave 3 (1965-1970)?

A

Strong economy and bull market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
66
Q

Wave 3 (1965-1970) ended with what type of legislative enforcement?

A

Antitrust enforcement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
67
Q

Wave 4a 1981-1987 was characterized by…

A

Going private

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
68
Q

Wave 4a saw the rise of…

A

The LBO/hostile takeovers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
69
Q

Wave 4a (1981-1987) what was occurring in the financial services industry?2

A

1 more leverage

2 capital markets innovation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
70
Q

Wave 4a (1981-1987) what economic and stock market activity was occurring during this period?

A

Falling interest rates/rising stock prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
71
Q

Wave 4b (1992-2000) how was this wave characterized?

A

Emergence of strategic buyer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
72
Q

Wave 4b was characterized by synergy among…

A

Related business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
73
Q

Wave 4b (1992-2000) what 5 industries did this primarily occur?

A 
1 healthcare
2 tech
3 defense 
4 financial services
5 oil and gas
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
74
Q

Wave 4b (1992-2000) what was the economic and stock market conditions of this period?

A

Low interest rates and high stock prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
75
Q

Wave 4b (1992-2000) this period experienced a historic high level of M&A activity of…

A

15% of GNP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
76
Q

Wave 4b: the Internet bubble and venture capital boom ended in…

A

2000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
77
Q

What dates did wave 5 occur?

A

2003-2007

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
78
Q

How was wave 5 (2003-2007) characterized?

A

Private equity wave

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
79
Q

During wave 5 (2003-2007) private equity and some hedge funds trumped…

A

Strategic buyers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
80
Q

Wave 5 (2003-2007) SOX in 2002 motivated many companies to…

A

Go private

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
81
Q

Wave 5 (2003-2007) what type of purchase returned during this period?

A

LBO returned

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
82
Q

Wave 5 (2003-2007) what financial innovation, economic activity and stock market activity was occurring during this time?2

A

1 CDOs

2 real estate boom

3 high stock prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
83
Q 
Wave 5 (2003-2007) during this period, shareholder's...
(Ex. Yahoo)
A

Rights started to prevail (Yahoo)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
84
Q

Wave 5 (2003-3007) how did this period end?

A

Collapse of capital markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
85
Q

Wave 5 (2003-2007) in addition to various banks, what 5 major companies collapsed during this period?5

A 
1 Lehman
2 Bear Sterns
3 AIG
4 Fannie
5 Freddie
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
86
Q

What was the major topic Joseph Schumpeter talked about?

A

Creative Destruction in M&A

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
87
Q

Joseph Schumpeter (creative destruction) said rationality is…

A

Not an explanation for cycles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
88
Q

Joseph Schumpeter (creative destruction) focuses on entrepreneur as…

A

Source for growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
89
Q

Joseph Schumpeter (creative destruction) an entrepreneur seeks to…

A

Create turmoil and revolutionize

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
90
Q

Joseph Schumpeter (creative destruction) an entrepreneur exploits…

A

Inventions or untried technology

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
91
Q

Joseph Schumpeter (creative destruction) an entrepreneur explains…

A

Disequilibrating effect of periodic prosperities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
92
Q

Joseph Schumpeter (creative destruction) the focus of entrepreneur (general) consists of…

A

Getting things done

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
93
Q

Schumpeter: 3 facts that describe the constant revolution of economic structure

A

1 destroying the old, creating the new

2 essential fact of capitalism

3 entrepreneurs at center of this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
94
Q

Schumpeter: M&A opportunists should listen for turbulence at levels of…

A

Firms and markets an exploit it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
95
Q

Schumpeter: M&A opportunists should regard M&A as an essential vehicle for…

A

Corporate change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
96
Q

The Sherman Antitrust Act of 1890 was intended to protect the public from avaricious business practices designed to…

A

Limit or eliminate competition in the market place

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
97
Q

The Sherman Antitrust Act…

A

Breaks up Monopoly power

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
98
Q

Drivers of Cross Border M&A: exploit…

A

Exploit market imperfections

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
99
Q

Drivers of Cross Border M&A, exploit market imperfections 5

A 
1 raw materials
2 labor costs
3 consumer demand
4 deregulation
5 trade liberalization
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
100
Q

Drivers of Cross Border M&A: reduce…

What is better?

A

Taxes (lower = better)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
101
Q

Drivers of Cross border M&A: diversify

Give example.

What do you want to look for?

A

If US is in recession, may want to go elsewhere

Look for low correlation with US market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
102
Q

Cross Border M&A: Exploit capital…

A

Markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
103
Q

Drivers of Cross Border M&A: exploit capital markets

A

Carry trade

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
104
Q

Drivers of Cross border M&A: exploit capital markets,

Define carry trade3

A

Currency, interest rates and inflation differences

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
105
Q

Driver of Cross border M&A: Exploit Capital Markets,

Foreign countries increase US M&A when…

A

Their economies are slow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
106
Q

Driver of Cross border M&A: Exploit Capital Markets,

The US invests in foreign countries when…

A

It’s growth is slow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
107
Q

Driver of Cross border M&A: Improve governance and…

A

Avoid regulation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
108
Q

Driver of Cross border M&A: Improve governance, avoid regulation.

Degrees of investor protection are…2

A

High in US and UK

Favorable regulatory environment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
109
Q

Strategic Analysis of Cross border M&A: key data 5

A 
1 economic growth rate
2 niche resources/capabilities
3 inflation, interest rates, exchange rates
4 valuation of assets
5 risks
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
110
Q

What is an example of risk in cross border M&A key data?

A

Sovereign debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
111
Q

Cross Border M&A Strategic analysis:

Macroeconomic view 5

A 
1 fiscal/monetary policy
2 exchange rate
3 intervention
4 trade
5 employment & welfare
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
112
Q

Michael Porter 1990 (Cross Border M&A)

Factor conditions define

A

Inputs of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
113
Q

Michael Porter 1990 (Cross Border M&A)

Factor conditions are inputs of production such as…3

A

1 labor
2 natural resources
3 infrastructure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
114
Q

Cross Border M&A: Microeconomic view 4

A

1 factor conditions
2 demand conditions
3 support industries
4 domestic rivalry and competitors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
115
Q

Cross Border M&A:

Demand conditions

A

Home market demand for goods and services (sophistication)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
116
Q

Cross Border M&A:

Support industries

A

Supplier and distribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
117
Q

Cross Border M&A:

Domestic rivalry and competitors

A

Stifled or supported

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
118
Q

Cross Border M&A Strategic analysis:

Institutions 5

A 
1 banking
2 stock market/investment regulation
3 watchdogs
4 judiciary
5 education system
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
119
Q

Cross Border M&A Strategic analysis:

Watchdogs 2

A

1 press

2 political parties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
120
Q

Cross Border M&A Strategic analysis:

Judiciary 3

A

1 independent

2 rule of law

3 respect for contracts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
121
Q

Cross Border M&A Strategic analysis:

Education system 2

A

1 literacy rates

2 generation of intellectual property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
122
Q

Cross Border M&A Strategic analysis:

Culture 5

A 
1 work ethic
2 entrepreneurship
3 leadership
4 tolerance for risk
5 appetite for profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
123
Q

Michael Porter 3 strategies

A

1 low cost leadership
2 differentiation
3 focus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
124
Q

Strategy: Mission, define2

A

What services or products do we provide to whom

and how?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
125
Q

Define M&A strategy2

A

How are we going to get there

and be who we want to be

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
126
Q

Strategy: objectives define

A

Goals and aspirations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
127
Q

Typical strategic decisions:

How do we create…

A

More value for who?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
128
Q

Typical Strategic decisions:

What businesses do…

A

We want to be in

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
129
Q

Typical Strategic decisions:

Where do we…

A

Want to grow?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
130
Q

What does the tool SWOT stand for?

A

Strengths
Weaknesses
Opportunities
Threats

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
131
Q

Michael Porter’s 3 strategies for competitive advantage:

Cost leadership define

A

Achieved by having the lowest prices in the target market segment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
132
Q

Michael Porter:

cost leadership is achieved by winning market share by appealing to…

A

cost conscious (price sensitive customers)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
133
Q

Michael Porter:

Differentiate products, where the target customer segment is…

A

Not price sensitive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
134
Q

Michael Porter:

Differentiate products where the market is either…

A

Competitive or saturated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
135
Q

Saturated market

A

Product already widely distributed throughout the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
136
Q

Michael Porter:

Differentiation is used when customers have…

A

Very specific needs

137
Q

Michael Porter:

Focus (AKA Segmented strategy or niche strategy)

A

Company focuses on a few target markets

138
Q

Target markets in focus strategy are distinct groups with…

A

Specialized needs

139
Q

Michael Porter’s Five Forces: industry Analysis & Firm’s Strategic Position

A 
1 Barriers to entry
2 Customer Power
3 Supplier Power
4 Threat of Substitutes
5 Rivalry Conduct
140
Q

Michael Porter:

Barriers to entry 5

A 
1 regulatory
2 brand
3 patents
4 high capital requirements
5 know how
141
Q

Michael Porter:

Customer Power

A

Customers price takers or price makers

142
Q

Michael Porter:

Supplier Power

A

Suppliers are price takers or price makers

143
Q

Michael Porter:

Threats of Substitutes (what does this do)

A

Limits pricing power

144
Q

Michael Porter:

Rivalry Conduct, it is dynamic among…

A

Players in the industry

145
Q

Tools, growth share matrix effectively allows you to compare…2 (subsets of 3)

A

1 growth/share/size

2 divisions/competitors/products

146
Q

Inorganic growth

A

Growth by acquisition

147
Q

Organic growth

A

Internal growth

148
Q

Organic vs. inorganic growth is a classic example of…

A

Make vs. buy

149
Q

3 paths to inorganic growth

A

1 benefit from relationship

2 need for ownership and control

3 manage risk

150
Q

Motive for inorganic growth:

Maturing…

A

Product line

151
Q

Motive for inorganic growth:

Regulatory or…

A

Antitrust limits

152
Q

Motive for inorganic growth:

Horizontal or…

A

Vertical integration

153
Q

Motive for inorganic growth:

Acquire…

A

Resources or capabilities

154
Q

One other motive for inorganic growth?

A

Diversify

155
Q

Horizontal integration

A

Consolidating peer firms

156
Q

Vertical integration

A

Along the value change

157
Q

3 motives for horizontal integration

A

1 increase market power

2 reduce competition

3 gain scale

158
Q

2 types of vertical integration

A

1 upstream

2 downstream

159
Q

Vertical Integration:

Upstream

1) whose acquired?
2) motive for acquiring?

A

1 distributors

2 retail for revenue growth

160
Q

Vertical integration

Downstream

1) whose acquired
2) motive for acquisition

A

1) suppliers

2) reduced expense

161
Q

Unique resources/capabilities 3

A

1 technology

2 know how

3 intellectual property

162
Q

Motives for diversification:

Uncorrelated…

A

Cash flows

163
Q

Motives for diversification:

Promote…

A

Knowledge transfer

164
Q

Motives for diversification:

Reduce…

A

Costs

165
Q

Motives for diversification:

Critical…

A

Mass

166
Q

Motives for diversification:

Internal…

A

Capital markets

167
Q

Critical mass

A

Minimum size or amount needed required to start/maintain a venture

168
Q

4 motives for Inorganic growth

A

1 contractual relationships
2 strategic alliances
3 joint ventures
4 minority investment

169
Q

Inorganic growth:

Contractual relationships examples (1st 3)3

A

1 licensing

2 co-marketing

3 co-development

170
Q

Inorganic growth:

Contractual relationship examples (2nd 3)3

A

1 joint purchasing

2 franchising

3 long term supply

171
Q

Inorganic growth:

Strategic Alliances 2

A

1 exchange or talent or resources

2 possible equity investments

172
Q

Inorganic growth:

Strategic alliances are characterized as more than…

A

Contractual

173
Q

Inorganic growth:

Joint ventures 2

A

1 separate entity

2 can be complex

174
Q

Inorganic growth:

Minority investment

A

1 noncontrolling equity investment

2 cross shareholding

175
Q

Restructuring:

Carve-out

A

Business unit to separate entity & IPO

176
Q

Restructuring:

Spin-off

A

Like a carve-out but parent gives stock to shareholders

177
Q

Restructuring:

Split-off or exchange

A

Shares are swapped

178
Q

Restructuring:

Tracking stock

A

Separate claim on subsidiary business

179
Q

Restructuring:

Recapitalization

A

Debt/equity mix change

180
Q

Divestiture motives:

First 3

A

1 regain focus

2 correct mistakes

3 capture market value of assets

181
Q

Divestiture motives:

Second 3

A

1 internal capital market

2 reduce leverage/taxes

3 gain financing

182
Q

Diversification vs. focus, which pays?

A

Focus

183
Q

Diversification is more likely to…

A

Divest

184
Q

Productivity is higher in…

A

Diversified companies

185
Q

Strategy: Some Lessons Learned:

Value creation…

A

Discipline is vital

186
Q

Strategy: Some Lessons Learned:

Avoid…

A

Avoid Momentum logic

187
Q

Strategy: Some Lessons Learned:

Concentrate of…

A

Sound investing

188
Q

Strategy: Some Lessons Learned:

Value oriented…

A

Management

189
Q

Strategy: Some Lessons Learned:

Guard against…

A

Stupidity

190
Q

Economics of information

A

Focus on obtaining high quality private info on targets

191
Q

Use personal networks to gain short cut to…

A

Targets

192
Q

Building a network is like investing in options…

A

Payoff is uncertain

193
Q

Contagion:

Diffusion of info is like…

A

The spread of rumors (unreliable)

194
Q

The currency of the search is…

A

Information

195
Q

Info generates insights which leads to…

A

Deals

196
Q

Principals of a search:

Requires a network that generates info and usually involves…

A

An exchange (give and get)

197
Q

Principals of a search:

Better to focus on process and relationships rather than…

A

Outcomes

198
Q

A buyer seeks private…

A

Asymmetric info

199
Q

Info that is private and clear is…

A

Costly

200
Q

According to efficient market hypothesis, market info is…

A

Fully priced

201
Q

Informational asymmetry leads to…

A

Profit arbitrage

202
Q

Acquisition guidelines (apply well and make a lot of money)

First 3

A

1 fragmented industry

2 favorable growth potential

3 reasonable valuations

203
Q

Acquisition guidelines (apply well and make a lot of money)

2nd 3

A

1 basic operations (no start ups)

2 recurring revenues

3 limited regulation

204
Q

Screening variables

1st 3

A

1 industry, position (share/rank), locations

2 resources/strategic capabilities

3 size: sales or assets

205
Q

Screening variables

2nd 3

A

1 profitability

2 risk exposure

3 asset type

206
Q

Screening variables

Risk exposure

A

Reduces or adds risk

207
Q

Screening variables

Asset type

A

Tangible or intangible

208
Q

Screening variables

3rd 3

A

1 management quality

2 prospective control

3 organizational fit

209
Q

Screening variables

Management quality, define w/example

A

1 personal goodwill

Ex. Dentist in practice is key to making business run

210
Q

Screening variables

Prospective control

A

What’s the prospect of buying all the shares

211
Q

Screening variables

Organizational fit2

A

1 complementary skill sets

2 can everyone get along

212
Q

Recurring revenues

A

Contract revenues are gold

213
Q

3 strategies of Michael Porter lead to…

A

Competitive advantage

214
Q

Screening criteria from kestrel ventures:

Establish…

A

Market position

215
Q

Screening criteria from kestrel ventures:

Potential of…

A

Growth

216
Q

Screening criteria from kestrel ventures:

Strong…

A

Cash flow potential

217
Q

Screening criteria from kestrel ventures:

Potential for…

A

Financing

218
Q

Screening criteria from kestrel ventures:

Platform for…

A

Management

219
Q

Social Networks in M&A:

Seeks to acquire info…

A

Held by others

220
Q

Social Networks in M&A:

Best info is from…1

2 what is it not from?

A

An exchange

Not one way

221
Q

Social Networks in M&A:

Degree of separation from those who know. 6 degrees

A

Average know 6 people away (1-11)

222
Q

Social Networks in M&A:

Studies show 3 key people in network, these are referred to as…

A

Rich nodes

223
Q

Social networks in M&A:

You don’t have to know everything, you just have to…

A

Be connected

224
Q

There is strength in…

A

Weak ties

225
Q

In networking, diversity and breadth matter more than…

A

Depth

226
Q

Under Metcalf’s Law, the value of network is proportional to the number of…

A

Working nodes in it

227
Q

Best info just comes from…

A

Showing up

228
Q

Early info, researcher should position to be…

A

Upstream

229
Q

3 types of navigators

A

1 connectors

2 river guides

3 gate keepers

230
Q

Networking:

Use connectors to get…

A

Upstream

231
Q

River guides

A

Industry experts

232
Q

Gatekeepers

A

Broker/investment banker

233
Q

11 steps of an acquisition in order

A 
1 strategy/search
2 discovery/initial contact
3 confidentiality agreement
4 term sheet/letter of interest
5 due diligence
6 board vote
7 public disclosure
8 antitrust filings
9 shareholder vote
10 closing
11 postmerger integration
234
Q

Discovery is not…

A

Not due diligence

235
Q

Due Diligence Purpose:

Direct research conducted by…

A

Buyer about target

236
Q

Due Diligence Purpose:

Provides support for…

A

Valuation

237
Q

Due Diligence Purpose:

Arms…

A

Negotiators

238
Q

Due Diligence Purpose:

Test accuracy of…

A

Reps and warranties

239
Q

Due Diligence Purpose:

Form basis of…

A

Postmerger integration

240
Q

Due Diligence Purpose:

Identification of…

A

Risks

241
Q

Due Diligence Purpose:

Employs…

A

Audit techniques

242
Q

Due diligence should focus on…

A

Developing knowledge

243
Q

Due diligence checklist 6

A 
1 Legal
2 IT
3 Operations
4 Accounting & Tax
5 HR
6 Other
244
Q

Never sign a non-compete agreement unless…

A

You are paid for a living

245
Q

For a non-compete agreement, bring it to an…

A

Employment attorney to negotiate

246
Q

Never sign a non compete agreement if it is…

A

Too restrictive

247
Q

Noncompete what do they do?

A

Prevent you from working for a competitor

248
Q

Merger of equals (MOE)

Definition

A

No control premium in transaction

249
Q

A merger of equals is bad for shareholders because…

A

No premium is paid

250
Q

A merger of equals is like a…

A

50/50 joint venture

251
Q

Merger of Equals (MOE) is an example of the impact of…

A

Social terms on deal price or terms

252
Q

Social (no economic) issues 4

A

1 mgt and governance
2 BoD
3 CEO/senior mgt.
4 key staff

253
Q

Social issues:

1st 3

A

1 mgt. team

2 retention pmts

3 severance pmts

254
Q

Social issues:

2nd 3

A

1 leadership succession

2 organizational design

3 board composition

255
Q

Social issues

3rd 3

A

1 Structure of transition

2 corporate name

3 headquarters location

256
Q

Valuation method:

Intrinsic value

A

Use triangulation to estimate

257
Q

Intrinsic value can’t be…

A

Can’t be observed in market

258
Q

Intrinsic value is a measurement with…

A

Error

259
Q

Intrinsic value uses…

A

Ranges of value

260
Q

Valuation method:

Book value is based upon…

A

GAAP

261
Q

Valuation method:

Book value is historical and…

A

Backward looking

262
Q

Valuation method:

Book value can understate…

A

Intangibles

263
Q

Valuation method:

Book value has very limited…

A

Application

264
Q

Liquidation value:

Characterized by fetch…

A

At auction

265
Q

Liquidation value:

Liquidation value is most…

A

Conservative

266
Q

Liquidation value:

Is not a…

A

Not a going concern

267
Q

Liquidation value:

Very specific to…

A

Appraiser

268
Q

Liquidation value:

How fine to…

A

Break it up

269
Q

Liquidation value:

Requires onsite…

A

Inspection

270
Q

Liquidation value:

Bust up or…

A

Breakup value

271
Q

Liquidation value:

Very limited…

A

Applications

272
Q

Valuation method, Replacement cost:

Cost to replace…

A

Assets piecemeal

273
Q

Valuation method, Replacement cost:

Current…

A

Conditions

274
Q

Valuation method, Replacement cost:

Very…

A

Subjective

275
Q

Valuation method, Replacement cost:

Some impossible to…

A

Replace

276
Q

Valuation method, Replacement cost:

Limited in…

A

Application

277
Q

Valuation: market value of firm is…

A

Market value of debt + market value of equity

278
Q

Valuation method, Market value:

Equity = share price X…

A

Number of shares

279
Q

Valuation method, Market value:

Debt equals the…

A

Present value of cash flows

280
Q

Valuation method, Market value:

The value of debt is sometimes close to…

A

Book

281
Q

Valuation method, Market value:

Reflects all that is known but does not reflect…

A

Asymmetric info

282
Q

Valuation method, Market value:

Market value of firm is useful in…2

A

Reference and negotiations

283
Q

Valuation method, Market value:

Marketable minority value needs adjustment for…

A

Control

284
Q

Valuation method, comparable peer market value:

Uses classic…

A

Multiples

285
Q

Valuation method, comparable peer market value:

Uses what kind of data?

A

Accounting data

286
Q

Valuation method, comparable peer market value:

EBITDA as a proxy for cash flow is…

A

Weak

287
Q

Valuation method, comparable peer market value:

Often data is…

A

Historical

288
Q

Value of an enterprise =

A

Value of equity + value of debt

289
Q

Valuation method, comparable peer market value:

There can sometimes be a lack of…

A

Lack of comparable firms

290
Q

Valuation Method: Actual transaction value of Peer firms:

Based upon…

A

Actual prices

291
Q

Valuation Method: Actual transaction value of Peer firms:

Hard to know if they are…

A

Comparable or current

292
Q

Valuation Method: Actual transaction value of Peer firms:

May reflect a…

A

Control premium

293
Q

Value Method: Discounted Cash Flow:

Firm’s enterprise value is the sum of…

Before any payments to…

A

PV of FCF

before any payments to debt or equity

294
Q

Value Method: Discounted Cash Flow:

Arise from all the many…

A

CF projects under management by the firm

295
Q

Value Method: Discounted Cash Flow:

Projects are assets which are…

A

Tangible or intangible

296
Q

Value Method: Discounted Cash Flow:

Enterprise FCF =…

A

Net profit + Noncash charges - investments

297
Q

Key concepts of DCF:

Return is…

It is not…

A

Net cash flow

Not accounting profit

298
Q

Key concepts of DCF:

Cash flow has…

A

Time value

299
Q

Key concepts of DCF:

Cash flows over different time period are not…

A

Directly comparable

300
Q

Key concepts of DCF:

Future cash flows (both benefits and costs or FCF) are reduced to…

A

Present value comparable

301
Q

DCF Assumptions:

Cash flows over time are…2

A

1 not comparable

2 must be adjusted

302
Q

Key concepts of DCF:

People prefer…

A

Present consumption over future consumption

303
Q

Key concepts of DCF:

People must be offered more in the future to…

A

Give up present consumption

304
Q

Key concepts of DCF:

The offer is called the…

A

Real rate of return

305
Q

Key concepts of DCF:

The greater the real rate of return and the further out into the future. The greater the difference between the value of…

A

CF today and CF in the future

306
Q

Key concepts of DCF:

Cash flows therefore must be weighted and we call that process…

A

Discounting

307
Q

What factors for choosing comparable companies out of a company list?

A

1 comparative ratios

2 similar business models

308
Q

How do you calculate NOPAT?

A

NOPAT = EBIT - tax

309
Q

Free Cash Flow Equation

A

FCF = NOPAT + depreciation + amortization - change in NWC - CAPEX

310
Q

Cost of capital is like the cost of any other raw material used in production, cash is the most…

A

Fundamental of raw materials

311
Q

The value of synergies is…

A

The value created when companies are merged together

312
Q

Marketable minority value is…

A

The value of 1 share

313
Q

Intangibles are often understated on the balance sheet because…

A

Associated with CF

314
Q

Replacement cost is…

A

Not often used in valuation

315
Q

Control value is equivalent to…

A

Marketable minority value

316
Q

Use market data instead of historic data when calculating…

A

WACC

317
Q

Control premium is a premium when…

A

Multiple shares are traded

318
Q

Midpoint is the…

A

Average of peer ratios

319
Q

Triangulate is developing views of…

A

Multiple ranges

320
Q

What is the calculation for EBITDA?

A

EBIT + Depreciation + Amortization

321
Q

What is the difference between EBITDA and FCF?3

FCF also subtracts out…3

A

1 taxes

2 change in NWC

3 CAPEX

322
Q

Expected market return - risk free rate =…

A

Market risk premium

323
Q

Enterprise value = value of debt + ..

A

Value of equity

324
Q

Value of equity =

A

Value of enterprise - value of debt

325
Q

Value of enterprise = value standalone + …

A

Valuesynergies

326
Q

Inplace Synergies:

Payoffs are reasonably…2

A

Predictable

Measurable in cash

327
Q

Real option synergies:

The right, but not the…

A

Obligation to pursue new strategies

328
Q

5 kinds in-place synergies

A 
1 revenue enhancement
2 cost reduction
3 asset reduction
4 tax reduction
5 financial synergies
329
Q

Real option synergies 5

A 
1 growth options
2 exit options
3 deferral options
4 alter operating scale
5 switch
330
Q

DCF synergies should use…

A

Bottom up approach

331
Q

Cost synergies analyze

A

NPV of cost savings

332
Q

Synergies:

Revenue enhancement 2

A

1 offer new products

2 sell to other companies customer base

333
Q

Synergies

Asset reduction, define, example

A

Sell assets that come to disuse

Ex. Company doesn’t need to headquarters

334
Q

Synergy:

Switch

A

Switch strategies

335
Q

DLOM

A

Discount for lack of marketability

336
Q

Another way to phrase discount for lack of marketability (DLOM)

A

Discount for illiquidity

337
Q

Long term debt includes…3

A

1 bonds

2 mortgages

3 other long term loans

338
Q

Other long term loans that are considered debt…

A

1 student loans

2 car loans

3 credit card debt

M&A (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions