Question 1

In Revlon v. McAndrews and Forbes Holdings, the court held:

Accepted Answer

A)  The bidding process was unfair 
B)  Pantry Pride's premium was not high enough 
C)  Forstmann Little's bid was appropriate 
D)  All the above 
A)  The bidding process was unfair 
B)  Pantry Pride's premium was not high enough 
C)  Forstmann Little's bid was appropriate 
D)  All the above A

Question 2

Which of the following is true of senior debt?

Accepted Answer

A)  The rate on senior debt is 2% to 3% above prime 
B)  Senior debt is usually about a quarter to a third of total LBO debt 
C)  The term is usually 5 to 10 years 
D)  All the above 
A)  The rate on senior debt is 2% to 3% above prime 
B)  Senior debt is usually about a quarter to a third of total LBO debt 
C)  The term is usually 5 to 10 years 
D)  All the above D

Question 3

Harris, Siegel, and Wright found productivity improvements for European companies that underwent an MBO.

Accepted Answer

A) True 
 B)False  True

Question 4

LBOs began to be a global phenomenon starting in the fifth merger wave.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following are desirable characteristics for LBO candidates?

Accepted Answer

A)  Stable cash flows 
B)  Unused debt capacity 
C)  Ability to cut costs 
D)  All the above 
E)  None of the above 
A)  Stable cash flows 
B)  Unused debt capacity 
C)  Ability to cut costs 
D)  All the above 
E)  None of the above

Question 6

A study by Travlos and Cornett shows a statistically significant negative correlation between abnormal returns to shareholders and the P/E ratio of the ﬁrm relative to the industry.

Accepted Answer

A) True 
 B)False

Question 7

Answer: In the United States two-tiered tender offers are not that common any more.

Accepted Answer

A) True 
 B)False

Question 8

Research shows that audit fees constitute what percent of total costs of being public?

Accepted Answer

A)  25% to 35% 
B)  Approximately 90% 
C)  50% to 60% 
D)  Roughly one third 
A)  25% to 35% 
B)  Approximately 90% 
C)  50% to 60% 
D)  Roughly one third

Question 9

Private equity firm is a more modern name for LBO firms.

Accepted Answer

A) True 
 B)False

Question 10

The first LBOs occurred in the fourth merger wave.

Accepted Answer

A) True 
 B)False

Question 11

Kaplan found that the tax benefits in LBOs were:

Accepted Answer

A)  Predictable 
B)  Built into the takeover premium 
C)  Did not affect the premium 
D)  Both a and c 
E)  Both a and b True or False 
A)  Predictable 
B)  Built into the takeover premium 
C)  Did not affect the premium 
D)  Both a and c 
E)  Both a and b True or False

Question 12

Research by Cao and data from Mergerstat showed that:

Accepted Answer

A)  LBO premiums were less than M&A premiums but increased over time 
B)  Decreased over time 
C)  No discernable pattern 
D)  None of the above 
A)  LBO premiums were less than M&A premiums but increased over time 
B)  Decreased over time 
C)  No discernable pattern 
D)  None of the above

Question 13

Kaplan found that the post-buyout investors did not enjoy the tax-related benefits of LBOs.

Accepted Answer

A) True 
 B)False

Question 14

Vertical strips:

Accepted Answer

A)  Refers to acquiring targets with whom the bidder has a backward relationship 
B)  Refers to acquiring targets with whom the bidder has a forward relationship 
C)  Refers to participating in several layers of LBO financing 
D)  None of the above 
A)  Refers to acquiring targets with whom the bidder has a backward relationship 
B)  Refers to acquiring targets with whom the bidder has a forward relationship 
C)  Refers to participating in several layers of LBO financing 
D)  None of the above

Question 15

Unsecured debt is sometimes also called subordinate debt.

Accepted Answer

A) True 
 B)False

Question 16

Answer: In his study of buyouts in the 1980s, Kaplan found post-buyout CEO ownership percentages:

Accepted Answer

A)  Fell 
B)  Rose 
C)  No consistent pattern 
D)  None of the above 
A)  Fell 
B)  Rose 
C)  No consistent pattern 
D)  None of the above

Question 17

Lehn and Poulson showed that buyout premiums were unrelated to the target's free cash flows.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following firms were or are considered "LBO firms"?

Accepted Answer

A)  KKR 
B)  TPG 
C)  Blackstone Group 
D)  All the above 
E)  None of the above 
A)  KKR 
B)  TPG 
C)  Blackstone Group 
D)  All the above 
E)  None of the above

Question 19

Research by Cao and data from Mergerstat showed that LBO premiums were less than M&A premiums.

Accepted Answer

A) True 
 B)False

Question 20

In Hansen Trust v. SCM the court concluded:

Accepted Answer

A)  Merrill Lynch was given favorable treatment 
B)  Use of lockup option was inappropriate 
C)  An appropriate auction was preempted 
D)  All the above 
E)  None of the above 
A)  Merrill Lynch was given favorable treatment 
B)  Use of lockup option was inappropriate 
C)  An appropriate auction was preempted 
D)  All the above 
E)  None of the above

In Revlon v. McAndrews and Forbes Holdings, the court held:

Which of the following is true of senior debt?

Harris, Siegel, and Wright found productivity improvements for European companies that underwent an MBO.

LBOs began to be a global phenomenon starting in the fifth merger wave.

Which of the following are desirable characteristics for LBO candidates?

A study by Travlos and Cornett shows a statistically significant negative correlation between abnormal returns to shareholders and the P/E ratio of the ﬁrm relative to the industry.

Answer: In the United States two-tiered tender offers are not that common any more.

Research shows that audit fees constitute what percent of total costs of being public?

Private equity firm is a more modern name for LBO firms.

The first LBOs occurred in the fourth merger wave.

Kaplan found that the tax benefits in LBOs were:

Research by Cao and data from Mergerstat showed that:

Kaplan found that the post-buyout investors did not enjoy the tax-related benefits of LBOs.

Vertical strips:

Unsecured debt is sometimes also called subordinate debt.

Answer: In his study of buyouts in the 1980s, Kaplan found post-buyout CEO ownership percentages:

Lehn and Poulson showed that buyout premiums were unrelated to the target's free cash flows.

Which of the following firms were or are considered "LBO firms"?

Research by Cao and data from Mergerstat showed that LBO premiums were less than M&A premiums.

In Hansen Trust v. SCM the court concluded:

Introduction

History of Mergers

Legal Framework

Merger Strategy

Antitakeover Measures

Takeover Tactics

Hedge Funds As Activist Investors

The Private Equity Market

The Junk Bond and the Leveraged Loan Market and Stapled Financing

Corporate Restructuring

Restructuring in Bankruptcy

Corporate Governance

Joint Ventures and Strategic Alliances

Valuation

Tax Issues in Mergers Acquisitions

Filters

Exam 8: Going-Private Transactions and Leveraged Buyouts

In Revlon v. McAndrews and Forbes Holdings, the court held:

Which of the following is true of senior debt?

Harris, Siegel, and Wright found productivity improvements for European companies that underwent an MBO.

LBOs began to be a global phenomenon starting in the fifth merger wave.

Which of the following are desirable characteristics for LBO candidates?

A study by Travlos and Cornett shows a statistically significant negative correlation between abnormal returns to shareholders and the P/E ratio of the ﬁrm relative to the industry.

Answer: In the United States two-tiered tender offers are not that common any more.

Research shows that audit fees constitute what percent of total costs of being public?

Private equity firm is a more modern name for LBO firms.

The first LBOs occurred in the fourth merger wave.

Kaplan found that the tax benefits in LBOs were:

Research by Cao and data from Mergerstat showed that:

Kaplan found that the post-buyout investors did not enjoy the tax-related benefits of LBOs.

Vertical strips:

Unsecured debt is sometimes also called subordinate debt.

Answer: In his study of buyouts in the 1980s, Kaplan found post-buyout CEO ownership percentages:

Lehn and Poulson showed that buyout premiums were unrelated to the target's free cash flows.

Which of the following firms were or are considered "LBO firms"?

Research by Cao and data from Mergerstat showed that LBO premiums were less than M&A premiums.

In Hansen Trust v. SCM the court concluded:

Introduction

History of Mergers

Legal Framework

Merger Strategy

Antitakeover Measures

Takeover Tactics

Hedge Funds As Activist Investors

The Private Equity Market

The Junk Bond and the Leveraged Loan Market and Stapled Financing

Corporate Restructuring

Restructuring in Bankruptcy

Corporate Governance

Joint Ventures and Strategic Alliances

Valuation

Tax Issues in Mergers Acquisitions

Filters