Introduction to Industrial Finance and Capital Markets

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Questions and Answers

What is a common question that shareholders ask before any strategic operation?

  • How much?
  • Where?
  • Why not? (correct)
  • Who?

What is a key factor in determining the success of an offensive business strategy?

  • Cash-out value
  • Decrease in profitability
  • Market downturn
  • Adaptation to tech developments (correct)

What does neutralizing competitors contribute to in business strategy?

  • Creation of barriers to entry (correct)
  • Increase in social risks
  • Decrease in production capacities
  • Reduction of market penetration

In the context of strategic operations, what does 'cash-out' typically refer to?

<p>Selling off assets (A)</p> Signup and view all the answers

Why is achieving the critical size important in business strategy?

<p>To reach economies of scale (C)</p> Signup and view all the answers

What does defensive business strategy aim to protect against?

<p>Market downturns (C)</p> Signup and view all the answers

What does 'IPO' stand for?

<p>Initial Public Offering (A)</p> Signup and view all the answers

What stage in a company's lifecycle is represented by 'Seed' capital?

<p>Birth (D)</p> Signup and view all the answers

What does 'LBO' stand for in the context of private equity?

<p>Leveraged Buyout (D)</p> Signup and view all the answers

According to the image, which of the following best describes the market conditions in Europe for 'big LBOs'?

<p>Uncertain (D)</p> Signup and view all the answers

Based on the graph, what is the trend for the amount of capital to invest in non-listed companies globally?

<p>Increasing (A)</p> Signup and view all the answers

What is cited as the reason for the high proportion of extreme valuation multiples in Q3 2023?

<p>Increase in transactions at multiples &lt; 7x EBITDA (C)</p> Signup and view all the answers

Who announced the intention to delete 1,850 posts, most of them in Finland, in the smartphones division inherited from Nokia?

<p>Google (C)</p> Signup and view all the answers

How much did Google spend on the depreciation of the asset related to the removal of 1,850 posts?

<p>$950 million (D)</p> Signup and view all the answers

Who acquired Motorola's cell phone branch for $12.5 billion before selling it to Lenovo for $2.9 billion?

<p>Google (D)</p> Signup and view all the answers

Why did Google make this decision resulting in a huge loss when selling Motorola's cell phone branch to Lenovo?

<p>To acquire more patents (A)</p> Signup and view all the answers

What was the main reason behind Google's intention to acquire patents related to smartphones back in 2011?

<p>Protection against legal actions by phone manufacturers (D)</p> Signup and view all the answers

Who founded the American conglomerate General Electric in 1892?

<p>Thomas Edison (A)</p> Signup and view all the answers

In a merger, what happens to the shareholders of the absorbed company?

<p>They become shareholders of the acquiring company. (B)</p> Signup and view all the answers

What is the primary concern when evaluating a potential merger?

<p>Determining the new ownership percentages of the merged company. (C)</p> Signup and view all the answers

In a joint venture, what happens to the original companies?

<p>They continue to operate independently alongside the new joint venture company. (B)</p> Signup and view all the answers

What is the primary concern when evaluating a potential joint venture?

<p>Determining the new ownership percentages of the joint venture company. (D)</p> Signup and view all the answers

In a merger, how many new entities are created?

<p>0 (D)</p> Signup and view all the answers

In a joint venture, how many new entities are created?

<p>1 (A)</p> Signup and view all the answers

What is the main advantage of external growth through horizontal integration?

<p>Achieving economies of scale (C)</p> Signup and view all the answers

Which type of external growth is considered the riskiest?

<p>Vertical integration (B)</p> Signup and view all the answers

What was Microsoft's primary motivation for acquiring Nokia's mobile phone division in 2013?

<p>To enter the mobile phone hardware market (C)</p> Signup and view all the answers

Which of the following is NOT a potential advantage of external growth through acquisition?

<p>Increasing competition in the market (B)</p> Signup and view all the answers

What is the primary challenge associated with post-merger integration, according to the survey mentioned?

<p>Harmonizing corporate cultures (C)</p> Signup and view all the answers

Which type of external growth involves acquiring companies that produce complementary products or services?

<p>Vertical integration (B)</p> Signup and view all the answers

What is the primary reason for pursuing external growth through conglomerate integration?

<p>To diversify into new, unrelated industries (B)</p> Signup and view all the answers

Which of the following is a potential disadvantage of external growth through acquisition?

<p>Integrating different corporate cultures (A)</p> Signup and view all the answers

Which of the following best describes the market conditions for 'big LBOs' in Europe according to the information provided?

<p>The market conditions are favorable for big LBOs in Europe. (C)</p> Signup and view all the answers

What is the primary reason cited for the high proportion of extreme valuation multiples in Q3 2023?

<p>Strong increase in transactions at multiples less than 7x EBITDA. (D)</p> Signup and view all the answers

What is the trend for the amount of capital available for investment in non-listed companies globally, based on the graph?

<p>The amount of capital is increasing. (C)</p> Signup and view all the answers

What does the term 'LBO' stand for in the context of private equity?

<p>Leveraged Buyout (D)</p> Signup and view all the answers

Which stage in a company's lifecycle is represented by 'Seed' capital?

<p>Birth (C)</p> Signup and view all the answers

What does the term 'IPO' stand for?

<p>Initial Public Offering (A)</p> Signup and view all the answers

What is the primary focus of the SKEMA PARIS 2024 M&A, Restructuring & L.B.O. course?

<p>Valuation, structuring, and financing of controlling-equity transactions (A)</p> Signup and view all the answers

What does 'L.B.O.' stand for in the context of the course description?

<p>Leveraged Buyout (C)</p> Signup and view all the answers

What aspect of business firm evaluation does the course provide the building blocks for understanding?

<p>Activity assessment in mergers and acquisitions (D)</p> Signup and view all the answers

In what type of growth does the course NOT focus on through acquisition?

<p>Diversification (A)</p> Signup and view all the answers

Which of the following best describes the purpose of the SKEMA PARIS 2024 M&A, Restructuring & L.B.O. course?

<p>Providing background on controlling-equity transactions (B)</p> Signup and view all the answers

What is the primary factor that influences the valuation of a company, according to the text?

<p>The company's intrinsic characteristics (B)</p> Signup and view all the answers

Which of the following is not listed as a potential shareholder strategy in the text?

<p>Hostile takeover (A)</p> Signup and view all the answers

What is the key point emphasized regarding strategy in the text?

<p>Aligning the business strategy with the shareholder strategy (A)</p> Signup and view all the answers

Which of the following is not a factor that should guide the thought process in valuation?

<p>Discounted Cash Flow (DCF) analysis (A)</p> Signup and view all the answers

What does the text suggest about the suitability of using a single valuation method for all situations?

<p>Different valuation methods should be used for different contexts (D)</p> Signup and view all the answers

What is a key consideration when evaluating a potential joint venture?

<p>The alignment between business and shareholder strategies (C)</p> Signup and view all the answers

What is the main difference between Acquisition and Merger in terms of shareholders?

<p>Shareholders from the acquired company become shareholders of the acquiring company in a Merger, but not in an Acquisition. (C)</p> Signup and view all the answers

Why is valuating Company B important before an acquisition?

<p>To estimate the potential value of Company A after the acquisition. (B)</p> Signup and view all the answers

What happens to original shareholders A and B in an Acquisition after the process is completed?

<p>They are both shareholders of the newly formed entity. (D)</p> Signup and view all the answers

In a Joint Venture, what is a common reason for creating this form of business combination?

<p>To share risks and resources while maintaining independence. (C)</p> Signup and view all the answers

Why might there be no point in valuating Company A if the payment for acquisition is in cash?

<p>The value of Company A would not impact the acquisition price. (C)</p> Signup and view all the answers

What is the primary reason for considering the value of entities in business combinations?

<p>To evaluate the potential worth of entities involved in the combination. (D)</p> Signup and view all the answers

What percentage of General Electric's total turnover comes from financial services?

<p>Up to 33% (D)</p> Signup and view all the answers

What did General Electric announce in April 2015 regarding its financial subsidiary, GE Capital?

<p>The sale of $26.5 billion worth of real estate assets (D)</p> Signup and view all the answers

How much time did General Electric initially give itself to exit the banking sector and sell its financial activities?

<p>Two years (C)</p> Signup and view all the answers

What additional sale did General Electric announce just two weeks after the initial $23 billion real estate asset sale?

<p>The sale of $74 billion worth of trade receivables (C)</p> Signup and view all the answers

Which company was the expected buyer of the $74 billion trade receivables portfolio from General Electric?

<p>Wells Fargo (C)</p> Signup and view all the answers

What did General Electric announce in October 2017 regarding its downsizing operation?

<p>The separation of $20 billion worth of activities (A)</p> Signup and view all the answers

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