Quiz 2

Question 1

A planning-based acquisition process consists of both a business plan and acquisition plan, which drive all subsequent implementation phases of the acquisition process (T/F)

Answer 1

True

Question 2

Understanding the assumptions underlying a business plan is relatively unimportant (T/F)

Answer 2

False

Question 3

It is generally easier yo find information on small privately held firms than large public companies (T/F)

Answer 3

False

Question 4

Cultural compatibility is often an important criterion used in the screening process (T/F)

Answer 4

True

Question 5

Letters of Intent always commit the buyer to paying the offer price stated in the LOI (T/F)

Answer 5

False

Question 6

Purchase price is determined during the negotiation phase of the acquisition process (T/F)

Answer 6

True

Question 7

Post-closing integration is a relatively unimportant part of the acquisition process (T/F)

Answer 7

False

Question 8

A business plan articulates a mission or vision for the firm and a strategy for realizing that mission (T/F)

Answer 8

True

Question 9

A business strategy lays out how to realize the mission for all the firm’s stakeholders over the long-term

Answer 9

True

Question 10

An acquisition plan defines the objectives to be achieved by acquiring another firm, management’s preferences as to how the acquisition process should be managed, resources required, and the roles and responsibilities of those responsible for implementing the plan

Answer 10

True

Question 11

An acquisition plan is developed if management determines that an acquisition or merger is required to implement the firm’s business strategy

Answer 11

True

Question 12

The market targeted by the firm should reflect the fit between the corporation’s primary strengths and competencies and its ability to satisfy customer needs better than the competition

Answer 12

True

Question 13

Resource limitations in developing the acquisition plan include overpayment risk, leverage through borrowing capacity, as well as current management skills

Answer 13

True

Question 14

Acquisition plans are kept at a high level, and therefore do not focus on timetables or the identification of who is responsible for each aspect of the acquisition process

Answer 14

False

Question 15

While management’s upfront involvement in the acquisition process is crucial, management should largely disengage from the process until the transaction is completed.

Answer 15

False

Question 16

Partnering with other firms through a joint venture may represent an attractive alternative to a merger or acquisition

Answer 16

True

Question 17

Contingency plans are actions that are taken as an alternative to the firms current business strategy

Answer 17

True

Question 18

The evaluation phase of the M&A process involves screening for potential acquisition targets

Answer 18

False

Question 19

Which of the following is generally not considered a key element of a business plan?
a) External Analysis
b) Internal analysis
c) tolerance for goodwill
d) functional strategies

Answer 19

c) tolerance for goodwill

Question 20

which one of the following is generally not considered a phase of the acquisition process?
a) developing a business plan
b) searching for the potential target
c) post closing integration
d) market segmentation

Answer 20

d) market segmentation

Question 21

due dilligence is most often performed by all of the following parties to the transaction except for:
a) the buyer
b) the seller
c) regulatory agencies
d) lenders

Answer 21

c) regulatory agencies

Question 22

which of the following are commonly used screening criteria?
a) Market share
b) Profitability
c) degree of leverage
d) all of the above

Answer 22

d) all of the above

Question 23

Which of the following phases of the acquisition process contains an “iteration” or “feedback” loop?
a) Negotiation phase
b) Search phase
c) Integration phase
d) post-closing evaluation phase

Answer 23

A) Negotiation phase

Question 24

Which of the following are not components of the negotiation phase of the acquisition process?
a) Refining valuation
b) identifying potential target firms
c) conducting due diligence
d) development the financing plan

Answer 24

b) identifying potential target firms

Question 25

Which of the following DOES NOT pertain to a confidentiality agreement (CA) signed between two companies?
a) mutually binding
b) both companies share confidential data with each other
c) A CA is signed in the first contact phase, prior to negotiation
d) confidentiality agreements have no definitive expiration date

Answer 25

d) confidentiality agreements have no definitive expiration date

Question 26

Which statement about due diligence is true?
a) due diligence is only required if an acquirer is purchasing a target using stock
b) due diligence is a key component of the Evaluation phase of the acquisition process
c) Acquirer due diligence helps to confirm or debunk expected sources of value or synergy assumed for the purchase price
d) screening for potential target firms involves due diligence

Answer 26

c) Acquirer due diligence helps to confirm or debunk expected sources of value or synergy assumed for the purchase price

Question 27

Which of the following statements is NOT TRUE regarding the Closing phase of the acquisition process?
a) Closing involves completing all details outlined in the Definitive Mergers Agreement (DMA) or plan of arrangement
b) Closing requires obtaining all necessary shareholder, regulatory and third party (customer,vendor) consents for the deal
c) The timing between negotiating a purchase price and closing can be months or even more than a year for transactions within highly regulated industries
d) The closing phase is the final phase of the acquisition

Answer 27

d) The closing phase is the final phase of the acquisition