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M&A Exam Questions with Answers – Prepped
Course | Mergers & Acquisitions PDF (2025-2026)
What is a merger?
2 companies of similar size, one buying another to achieve a strategic goal.
What is an acquisition?
1 company is larger than the other, to achieve a strategic goal.
What are the 2 common goals of M&A?
Reduce risk & earn more.
What does the Legal Team in a M&A process do?
Peform legal DD and put together together Share Purchase Agreement
What is the typical Buy-Side M&A process?
Investment Thesis, Target Identification, DD, Valuation & Structure, Negotiation & Financing
and then Closing & Integration.
What is typical Sell-Side M&A process?
Preparation Phase, Buyer Identification, DD, Bidding Phase, Negotiation & Financing and then
Closing & Integration.
What is Horizontal Investment/Roll-Up? Why is it done?
2 companies in same industry merger. It is done for economies of scale, to increase market share
and decrease competition.
What is Vertical Investment? Why is it done?
Acquiring part of the supply chain. Typically done to gain better control, efficiency and greater
profit margins.
What is strategic investment? Why is it done?
Done by a corporate (as opposed to financial sponsor) with the goal to improve strategy.
Typically done to enter new market, gain a new capability or gain new knowledge.
What is a Reverse Merger? Why is it done?
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A reverse merger is when a private company acquires a public company. It is done as it can be
cheaper than IPOs and to dodge risk that come with IPO - underpricing/overpricing can lose
investor trust.
Explain Underpricing/Overpricing in IPOs and their implications, as a motivation for reverse
mergers?
Under-pricing IPO means new investors will gain larger ownership % than they should for the
amount of capital they put in because you underpriced, very frustrating for existing owners.
Overpricing, new investors get bitten as they don't get ROI they expect once it hits market, hurts
future equity raising.
Buy-Side: Target ID, what is it and how is it done?
Identifying target companies with a specific goal/criteria which we set in the investment thesis
stage.
How this is done?
Market Research - creating a list of potential targets that meet established criteria
Initial Screening - preliminary DD of first list to create a shortlist
Perform Evaluation - reaching out to shortlisted companies to understand if they'd be open, sign
NDA to get financials and more details
What is done on the sell-side preparation phase?
Understand what the sellers priorities are from the sale, restructuring to make the business more
attractive, doing light DD to identify potential weaknesses that may cause deal to collapse later
and marketing - teaser doc and Confidential Information Memorandum.
What are the 4 sides of DD?
Financial, Tax, Legal and Operational.
How does Net Income relate to Equity?
Profits generated on Profit Loss statement. left over after dividends are paid, are added to
Retained Earnings which increase a company's equity.
What are common non-cash expense on P&L?
D&A, Stock Based compensation (not a cash outlay but fair value equity), Impairment, Bad Debt
Expense.
What are the 3 key areas of Financial Due Diligence?
Financial Analysis, Quality of Earnings and Purchase Price Adjustments.
What are the 4 steps of Financial Analysis in FDD?
M&A Exam Questions with Answers – Prepped
Course | Mergers & Acquisitions PDF (2025-2026)
What is a merger?
2 companies of similar size, one buying another to achieve a strategic goal.
What is an acquisition?
1 company is larger than the other, to achieve a strategic goal.
What are the 2 common goals of M&A?
Reduce risk & earn more.
What does the Legal Team in a M&A process do?
Peform legal DD and put together together Share Purchase Agreement
What is the typical Buy-Side M&A process?
Investment Thesis, Target Identification, DD, Valuation & Structure, Negotiation & Financing
and then Closing & Integration.
What is typical Sell-Side M&A process?
Preparation Phase, Buyer Identification, DD, Bidding Phase, Negotiation & Financing and then
Closing & Integration.
What is Horizontal Investment/Roll-Up? Why is it done?
2 companies in same industry merger. It is done for economies of scale, to increase market share
and decrease competition.
What is Vertical Investment? Why is it done?
Acquiring part of the supply chain. Typically done to gain better control, efficiency and greater
profit margins.
What is strategic investment? Why is it done?
Done by a corporate (as opposed to financial sponsor) with the goal to improve strategy.
Typically done to enter new market, gain a new capability or gain new knowledge.
What is a Reverse Merger? Why is it done?
, 2|Page
A reverse merger is when a private company acquires a public company. It is done as it can be
cheaper than IPOs and to dodge risk that come with IPO - underpricing/overpricing can lose
investor trust.
Explain Underpricing/Overpricing in IPOs and their implications, as a motivation for reverse
mergers?
Under-pricing IPO means new investors will gain larger ownership % than they should for the
amount of capital they put in because you underpriced, very frustrating for existing owners.
Overpricing, new investors get bitten as they don't get ROI they expect once it hits market, hurts
future equity raising.
Buy-Side: Target ID, what is it and how is it done?
Identifying target companies with a specific goal/criteria which we set in the investment thesis
stage.
How this is done?
Market Research - creating a list of potential targets that meet established criteria
Initial Screening - preliminary DD of first list to create a shortlist
Perform Evaluation - reaching out to shortlisted companies to understand if they'd be open, sign
NDA to get financials and more details
What is done on the sell-side preparation phase?
Understand what the sellers priorities are from the sale, restructuring to make the business more
attractive, doing light DD to identify potential weaknesses that may cause deal to collapse later
and marketing - teaser doc and Confidential Information Memorandum.
What are the 4 sides of DD?
Financial, Tax, Legal and Operational.
How does Net Income relate to Equity?
Profits generated on Profit Loss statement. left over after dividends are paid, are added to
Retained Earnings which increase a company's equity.
What are common non-cash expense on P&L?
D&A, Stock Based compensation (not a cash outlay but fair value equity), Impairment, Bad Debt
Expense.
What are the 3 key areas of Financial Due Diligence?
Financial Analysis, Quality of Earnings and Purchase Price Adjustments.
What are the 4 steps of Financial Analysis in FDD?
