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M&A Readiness Test

Take this quiz to see if you're ready for a move into M&A!

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Question 1 of 20

In a DCF model, which of the following would most likely increase a company's terminal value (assuming all else equal)?

A

Increasing the tax rate

B

Reducing capital expenditures

C

Using a higher discount rate

D

Reducing revenue growth rate

Question 2 of 20

What is the most appropriate multiple to use when valuing a capital-intensive business using precedent transactions?

A

EV/Revenue

B

EV/EBIT

C

EV/EBITDA

D

P/E

Question 3 of 20

In an LBO model, which of the following has the greatest impact on IRR?

A

Entry multiple

B

Revenue growth

C

Leverage ratio

D

Exit multiple

Question 4 of 20

When using trading comparables, which of the following should ideally be matched to the target company?

A

Industry, size, and margin profile

B

Dividend payout ratio

C

Market capitalisation

D

P/E multiple only

Question 5 of 20

A reverse merger is best described as:

A

A public company acquiring a private company

B

A private company acquiring a public company to gain public listing

C

Two private companies merging to create a SPAC

D

A carve-out of a public subsidiary

Question 6 of 20

In a share deal (vs. an asset deal), the buyer:

A

Avoids inheriting liabilities

B

Typically pays less tax

C

Acquires both assets and liabilities

D

Only acquires specific assets

Question 7 of 20

In financial due diligence, what is the most common adjustment made to EBITDA?

A

Removal of revenue from discontinued operations

B

Adding back depreciation

C

Adding back non-recurring expenses

D

Deducting capital expenditures

Question 8 of 20

During commercial due diligence, which of the following would most directly impact revenue forecasts?

A

Competitive positioning

B

Management compensation

C

Capital structure

D

Lease liabilities

Question 9 of 20

If customer churn is high and customer acquisition cost is rising, which due diligence area should be flagged?

A

Legal diligence

B

HR diligence

C

Commercial diligence

D

Financial diligence

Question 10 of 20

In a 3-statement model, which of the following increases both EBITDA and operating cash flow?

A

Reduction in headcount

B

Increase in accounts payable

C

Gain on asset sale

D

Change in inventory accounting policy

Question 11 of 20

In a sensitivity table comparing WACC and terminal growth, which cell typically yields the highest valuation?

A

Low WACC, high growth

B

Low WACC, low growth

C

High WACC, low growth

D

High WACC, high growth

Question 12 of 20

What is the biggest risk in post-merger integration for horizontal mergers?

A

Financial reporting integration

B

ERP system failure

C

Cultural misalignment

D

Legal structure harmonisation

Question 13 of 20

Which of the following bodies enforces competition law in Australia?

A

ASX

B

FIRB

C

ACCC

D

ASIC

Question 14 of 20

Which tactic is commonly used by buyers to mitigate valuation uncertainty in high-growth startups?

A

Break fee

B

Earn-out

C

Equity swap

D

Put option

Question 15 of 20

Which of the following is a typical revenue synergy in a horizontal acquisition?

A

Shared back office

B

Cross-selling across customer bases

C

Consolidating IT infrastructure

D

Headcount reduction

Question 16 of 20

What is the primary purpose of a Letter of Intent (LOI)?

A

Legally bind both parties

B

Settle the final purchase price

C

Outline the key terms prior to due diligence

D

Replace the need for a Share Sale Agreement

Question 17 of 20

Which of the following best explains why buyers often exclude synergies from the purchase price?

A

It simplifies regulatory filings

B

It avoids post-close integration complexity

C

It allows a faster signing process

D

Synergies are generated by the buyer, not acquired from the seller

Question 18 of 20

Which of the following would most likely reduce your net working capital in a transaction?

A

Increasing accounts receivable

B

Increasing accounts payable

C

Increasing prepaid expenses

D

Increasing inventory

Question 19 of 20

In a merger model, which of the following would cause EPS accretion (assuming all else equal)?

A

Paying a high premium

B

Acquiring a target with a lower P/E than the acquirer

C

Issuing more shares than needed

D

Taking on more net debt than equity

Question 20 of 20

In financial due diligence, what is typically included in a “quality of earnings” (QoE) adjustment?

A

Accrual for pending litigation

B

Removal of one-off consulting income

C

Depreciation policy analysis

D

Analysis of debt covenants

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