M&A Integrated Assessment of Competence Consolidated Study Notes

Comprehensive practice flashcards covering Mergers & Acquisitions theory, strategy, legal frameworks, and structural mechanics as per the IAC 2027 Consolidated Notes.

The central justification for almost any merger is __________; the combined entity is expected to be worth more than the sum of the two entities operating independently.

synergy

Three specific types of synergy are __________, __________, and __________ synergy.

Revenue; Cost; Financial

A profitable acquirer can use a loss-making target's accumulated __________ to shelter future taxable income, provided the trade continues in substantially the same form.

assessed tax losses

__________ synergy occurs when a combined group can raise or deploy capital more cheaply, for example, through a lower cost of debt from a stronger balance sheet.

Financial

In an IAC exam, the __________ price is derived from the target's market price if listed, or a dividend growth model if unlisted.

floor

The __________ price for an acquirer is the value of bought-in earnings, calculated as $Target's\,earnings/FCFE + Synergy\,earnings$, capitalised at the acquirer's P/E or discounted at the acquirer's cost of equity.

ceiling

When buying __________, an acquirer inherits a fresh tax base in the assets leading to higher wear-and-tear/capital allowances, but does not inherit the target's assessed losses.

assets

A(n) __________ occurs when a smaller listed company acquires a larger unlisted company, resulting in the unlisted company's shareholders gaining control of the combined group.

reverse takeover

The formula to calculate the implied Market Premium paid by an acquirer is __________.

$$Premium\,\% = [ (MP_{acquirer} \times ER) / MP_{target} ] - 1$$

A reactive defensive tactic where the target invites a friendlier, preferred acquirer to make a competing bid is known as a(n) __________.

white knight

The __________ involves the target turning around and making a counter-bid for the hostile acquirer itself.

Pac-Man defence

__________ are mechanisms like rights issues to existing shareholders at a discount, triggered by a hostile bid, intended to dilute the bidder's stake.

Poison pills

The disposal of part of an entity's activities, often due to lack of commercial fit or failed integration, is termed __________.

divestment

In a(n) __________, a holding company distributes its shareholding in a subsidiary directly to its own shareholders pro-rata, often to remove a conglomerate discount.

unbundling

An MBO is typically financed as a(n) __________, where the majority of the purchase price is funded through debt.

leveraged buy-out

The layers of debt in an LBO typically include secured loans, __________, and preference shares.

mezzanine finance

Under Section 44 of the Companies Act, directors providing financial assistance for share subscription must ensure the company meets the __________ test.

solvency and liquidity

Banks may subscribe for preference shares in a BEE SPV, allowing for a lower effective cost of funding often set at roughly __________ of prime due to tax exemptions.

$$70-74\%$$

__________ is the risk that a company's overseas investment suffers adverse action, such as expropriation or exchange control regulations, by a host government.

Political risk

A(n) __________ reduces political risk by sharing capital, utilizing local knowledge, and providing a buffer against government action through local ownership.

joint venture

Since 2011, the __________ in South Africa creates specific statutory obligations for franchisors, including mandatory disclosure and cooling-off rights for franchisees.

Consumer Protection Act

In franchise M&A deals, __________ are protected only through confidentiality covenants and the seller's conduct, as they lack a formal registration system like patents.

trade secrets

The two broad approaches to IT systems integration post-merger are __________ and the __________.

Complete absorption; preservation approach

The Pioneer Foods and Future Life Health Products merger was conditionally approved by the __________ subject to admitting employees into an Employee Share Ownership Scheme.

Competition Tribunal

Section __________ of the Companies Act restricts target boards from taking frustrating actions to defeat a genuine offer once it has been made or is imminent.

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