Venture Capital PDF

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Monday, 29 November 2021
Venture Capital
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ER Diagram
Question 18 It is used to service and pay down the outstanding debt during the ownership of the company.
Visual Paradigm Correct
Online
Mark 1.00 out of
Accomplished ER 1.00 Answer: CASH FLOW
Diagram Remove flag
Fl
a
g Question 7 Companies of relatively large sizes and industries can be targets of leveraged buyout
For any rewards: g Correct transactions
e
d Mark 1.00 out of
1.00 Select one:
Flag question True
N
ot False
fla
g
g
Question 3 e Large LBO firms generally have a more regimented hierarchy and firm structure where the roles are more
d
Correct defined for associates, and where there are unlimited internal promotion opportunities and unlimited
Mark 1.00 out of opportunities to get involved in deal sourcing
1.00
Flag question Select one:

N
True
ot
fla False
g
g
e
We want nothing but Question 10
d
They deal routinely with the private equity firm’s Investment Committee.
the best in all of you, Correct
rest assured that our
sources will Mark 1.00 out of Select one:
continuously be 1.00
Managing Director
updated, keep safe Flag question
everyone. N
Principal
ot
fla
g Vice President
Popular Posts
g
CCNAv7 e Partner
: d
Enterpris
e
Networki
ng, Security, and Your answer is correct.
Automation
(no title)
Question 9 They are expected to generate investment opportunities and potential acquisition ideas.
Correct
Mark 1.00 out of Select one:

1.00
Associate
Electronics 2: Flag question
Electronic Circuit N Vice President
Analysis and Design ot
fla
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12/3/21, 6:46 PM https://dnzmcext2.blogspot.com/search/label/Venture Capital
Theoretical g Managing Director
Foundations of g
Nursing (PQ1, PQ2, e
Principal (CORRECT W/ THE SAME QUESTION)
PEXAM, MQ1, MQ2, d
MEXAM)
Treasury
Management Your answer is correct.
Web Application
Development 2 /
Application Question 22
TRADE (STRATEGIC) SALE
Development and Answer saved
Emerging Technology A financial sponsor may realize gains in a portfolio company investment via a sale to a strategic acquirer.
Marked out of
1.00 This allows for an immediate liquidity event for the financial sponsor. Strategic buyers typically intend to
Programming Logic
hold the acquisition over the long-term and thereby gain a greater competitive advantage and market
and Design (PQ1, Remove flag
PQ2, PEXAM, MQ1, Fl share in its respective industry. A strategic buyer is usually a non-PE firm, and the acquisition is in the
MEXAM, FQ1, FQ2 & a buyer’s strategic interest (whether it’s for market growth, trade secrets, new products, synergies, or other
FEXAM) g business improvements). Therefore the trade sale will usually command the highest sale price. For these
g
reasons, the sale to a strategic buyer is generally the preferred exit option for an LBO investor.
e
d
Select one:
True
False
Question 12 A due diligence question that includes understanding how sustainable the target’s business model is and
Answer saved where it is positioned relative to its competitors.
Marked out of
1.00 Select one:
Remove flag Competitive landscape and market position
Fl
a
g
Financial performance
g
e Industry growth/addressable market
d
Capital requirements of the business
Customer base/suppliers
Question 29 What is the primary benefit of an IPO exit for a portfolio company?
Answer saved
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1.00
Remove flag
Fl
The potential for a high valuation, provided that there is investor demand
a
g
for equity in the company and stable, favorable public market conditions is
g the primary benefit of an IPO exit for a portfolio company.
e
d
Question 23
Answer saved A commercial due diligence includes understanding the company’s value proposition,
Marked out of
market position, historical performance, and industry trends in order to assess the target’s ability to
1.00
achieve its forecast projections.
Remove flag
Fl
a
a
g
Question 5 One restrictive characteristic is that it is often not pre-payable by the company for a few years, so that
g
e high yield debt investors can lock-in their high interest rate for at least a couple years.
Answer saved
d
Marked out of
1.00
Select one or more:
Remove flag
High yield debt
Fl
a Equity
g
g
Subordinated debt
e
d
Senior debt
Question 34 This legal due diligence includes a detailed review of key operating or capital leases.
Answer saved
Marked out of Select one:

1.00
Material contracts
Remove flag
Fl Environmental
a
g
g Corporate filings
e
d Property, plant and equipment
Information technology
Health and welfare plans
Lawsuits, litigations, patents
Human resources
Clear my choice
Question 35
This legal due diligence understands any potential liabilities the business is exposed to in its
Answer saved
environment while conducting the day-to-day processes, such as hazardous material or toxic waste.
Marked out of
1.00
Select one:
Remove flag
Fl
a
g Corporate filings
g
e
d
Environmental
Property, plant and equipment
Material contracts
Human resources
Question 30 Works closely with the senior partners of the firm on strategy and negotiations.
Answer saved

1.00
Director
Remove flag
Fl Partner
a
g
g Associate
e
d Vice President

Question 27 How can financial sponsors help create value by optimizing a target company’s capital structure?
Answer saved
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Remove flag
Fl They can help create value through the optimization as it attains more leverage which results to
a less equity in terms of purchasing the company originally. Hence, realizing the optimal capital
g
structure of a firm enables the maximization of its returns.
g
e
d
Question 18
This PE investments are made at an early stage in the company’s life cycle.
Answer saved
Marked out of
1.00
Select one:
Remove flag
Fl leveraged buyout
a
g
growth capital
g
e
d mezzanine financing
venture capital
distressed buyout
Question 15 Private equity firms were able to complete blockbuster buyouts during 2005-2007 due to stringent US
Answer saved monetary policy and strong credit markets.
Marked out of
1.00 Select one:
Remove flag True
Fl
a False
g
g
e
Question
d 11 They interact directly with the management of portfolio companies, target companies, and investment
Answer saved banks.
Marked out of (TRY YOUR LUCK, MANAGING DIRECTOR IS CORRECT)
1.00
Remove flag
Select one:
Fl
a Partner (CORRECT W/ THE SAME QUESTION)
g
g Managing Director
e
d
Associate
Managing Director
Question 10 This legal due diligence provides a summary of any pending litigation, history of past litigations, and what
Answer saved may arise in the company, such as environmental, employment, customer or worker compensation issues.
Marked out of
1.00 Select one:
Remove flag Environmental
Fl
Fl
a
g
g
e Information technology
d
Material contracts
Human resources
Corporate filings
Question 8 A due diligence question that includes understanding the market environment and the external factors
Answer saved affecting the business.
Marked out of
1.00 Select one:
Remove flag Financial performance
Fl
a
g
Competitive landscape and market position
g
e Capital requirements of the business
d
Industry growth/addressable market
Question 7 Describe what happens during the initial due diligence and management presentation in the investment
Answer saved process.
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Fl
a In this stage, the investment team would prepare initial due diligence to heighten
g
understandability to the company which includes research and gathering of information that
g
e are beneficial to the company's growth and future decisions. Leading it closely to its potential
d buyers that would go into the management team's prepared presentation.
Question 3 Before 2008, large-scale buyouts were becoming ever more prevalent. Which company generated the
Answer saved largest Leveraged buyout of US$44B?
Marked out of
1.00 Select one:
Remove flag Toys “R” Us
Fl
a
Hertz Corporation
g
g
e Energy Future Holdings
d
Hilton Hotels
Harrah’s Entertainment

Question 25 The PE industry in the U.S. alone in the period 2005-2007 made deals amounting to nearly $1.1 trillion in
Answer saved value, but during 2008-2010, deals worth only $408 billion were made. How many percentage was the
Marked out of drop in capital employed?
1.00
Remove flag
Fl Answer: 62%
a
g
g
Question 24
e
d
Identify the channels through which an investment opportunity may be sourced.
Answer saved
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1.00
Remove flag
Fl
a
g
g
An investment opportunity may be sourced from
e the following channels:
d
- Internal Analysis
- Networking
- Detailed Research
- Cold-calling executives at attractive companies
Other sources could also be used such as meeting

with various companies and so on.
Question 7 Once a private equity firm has officially signed a deal with the target company, what needs to be finalized
Answer saved before closing the investment process?
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Remove flag
Fl
a
g
g
e The following are some examples of the items that
d will be finalized before closing the investment
process:
1. Management Equity Roll-Over and Incentive

Option Pool
2. Execute Debt Financing
3. Closing Funds Flow
Question 32 A characteristic of an LBO firm that continually search for companies that are well-positioned to benefit
Answer saved from attractive industry trends, since it results in above market growth and provides stronger equity
Marked out of return potential as well as stronger downside protection for the investment.
1.00
Remove flag Select one:

Fl
Multiple avenues of growth
a
g
g Multiple areas to create value
e
d Stable, recurring cash flows
Favorable industry trends

Strong market position and sustainable competitive

advantage
Low capital expenditure requirements
Strong management team
Clear my choice
Question 33 It is the acquisition of a public or private company with a significant amount of borrowed funds.
Answer saved
Marked out of
1.00 Answer: leveraged buyout
Remove flag
Fl
a
g
g
Question 23
e
d
In this type of buyout, the creditors are likely to become equity holders, they will acquire many rights as
Answer saved full or partial owners of the business, and this can lead to very important issues regarding control of the
Marked out of business.
1.00

Fl
leveraged buyout
a
g
g mezzanine financing
e
d venture capital
growth capital
distressed buyout
Question 17 It has the lowest financial cost and is the first in line in the capital structure to receive its money during
Answer saved the liquidation of the company.
Marked out of
1.00 Select one:
Remove flag High yield debt
Fl
a
g
Senior debt
g
e Subordinated debt
d
Equity
Question 13 Complete the typical career path for pre-MBA Private Equity professionals
Answer saved
Background image for dragging markers onto
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1.00 Vice President
Senior Associate
Remove flag Associate
Fl
Question 11 Full Time Analyst
A main area of financial due diligence that calculates the company’s total debt-like items
a
g Answer saved outstanding, because it will impact the total amount given to the sellers.
g
Marked out of
e
d
1.00 Select one:
Remove flag Debt and debt-like items
Fl
a
g
Human resources
g
e Normal working level of capital
d
Quality of earnings

Tax structure
Question 10 Examples of a good LBO candidate include selling underperforming assets, increasing the efficiency of
Answer saved operations, pricing optimization, organizational structure, and diversifying the customer base.
Marked out of
1.00 Select one:
Remove flag Strong market position and sustainable competitive
Fl
advantage
a
g
g Multiple areas to create value
e
d Low capital expenditure requirements
Stable, recurring cash flows
Question 4
Instead of being seen as an industry that focuses on making operations leaner through layoffs and
Answer saved
restructuring, PE firms are starting to be seen as being able to help sustain and build companies, as well
Marked out of as increase employment levels.
1.00
Remove flag
Fl
a Select one:
g
g
True
e
False
d
Question 13 Capital structure considerations are important for all private equity deals.
Answer saved

1.00
True
Remove flag
Fl False
a
g
g
Question
e 8 Complete the LBO Steps. (2.50/5.00)
d
Answer saved
Marked out of
Background image for dragging markers onto
1.00
Remove flag
Fl Purchase Price Assumptions
a
g Question 3 This type of PE is the acquisition of a publicly or privately-held company, typically characterized
g
Answer saved by the significant amount of debtSources
Create financing
and used
Uses for the acquisition relative to the equity
e
d Marked out of financing used.
1.00
Financial Projections
Fl
leveraged buyout
a
Calculation of IRR on Initial Investment
g
g growth capital
e
Adjustments of Balance Sheet
d distressed buyout
venture capital Calculation of Exit Value
mezzanine financing
Question 2 Private equity firms create funds to focus on areas where they think that can create value for companies.
Answer saved

1.00
True
Remove flag
Fl False
a
g
g
Question
e 34 A due diligence question that looks into the company’s historical performance in order to understand
d
Answer saved how realistic the company’s forecast projections are.
Marked out of
1.00 Select one:
Remove flag Financial performance
Fl
a
g
g
d
Question 31 Typical management fees of PE firms represents what percentage of the total assets under management
Answer saved annually.
Marked out of
1.00 Select one:
Remove flag 1.0%
Fl
a
g
1.5%
g
e 2.0%
d
2.5%
Question 27 A due diligence question that includes understanding of the total capital needed to run the operations of
Answer saved a business is needed, especially during difficult times.
Marked out of
1.00 Select one:
Remove flag Customer base/suppliers
Fl
a
g
g
d
Financial performance
Clear my choice
Question 28
Answer saved FINANCIAL due diligence confirms that all the financial information provided is accurate
Marked out of
and helps PE firms understand some of the unique dynamics of the company from a financial reporting
1.00
perspective.
Remove flag
Fl
a
g
g
Question 24 The largest component of an LBO company’s capital structure.
e
Answer saved
d

1.00
High yield debt
Remove flag
Fl Senior debt
a
g
g Equity
e

d
Subordinated debt
Clear my choice
Question 25 After the target company and its investment banking advisors choose a few bidders, what happens next?
Answer saved
Marked out of
1.00
Remove flag
Fl In coming up into those chosen bidders, some key considerations have been the basis of the
a seller such as total purchase price, credibility of the offer, and so on. Subsequently, Further due
g
diligence with management is the next to happen, to followed by Building an Internal Operating
g
e Model, Preliminary Investment Memorandum, Final Due Diligence and process up to submit a
d binding bid, Update and Final Committee Approval, and last, to the Final Binding Bid and Signing.
Question 22 Main responsibilities is to source investment opportunities by cultivating and maintaining relationships
Answer saved with investment bankers, consultants, and others.
Marked out of
1.00 Select one:
Remove flag Partner
Fl
a
g
Associate
g
e Principals
d
Vice President
Question 18 This legal due diligence looks at employment terms/agreements, individual contracts, collectively
Answer saved bargained agreements, and retention/severance agreements.
Marked out of
1.00 Select one:
Remove flag Health and welfare plans
Fl
a
g
g
e Corporate filings
d
Material contracts
Human resources
Environmental
Question 16 This type of PE is characterized by the size of investment between $50,000 to $5M.
Answer saved

1.00
distressed buyout
Remove flag
Fl mezzanine financing
a
g
g
g growth capital
e
d leveraged buyout
venture capital
Clear my choice
Question 17
Today, practically all PE deals are executed with the sole intention of creating economic value for
Answer saved
shareholders and the economy at large.
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Remove flag
Fl Select one:
a True
g
g False
e
d
Question 15 Handles most of the financial modeling and initial due diligence for investment opportunities
Answer saved

1.00
Managing Director
Remove flag
Fl Principal
a
g
g Vice President
e
d Associate
Question 12 What will the investment deal team and its consultants do in order to provide a Final Binding Bid for the
Answer saved target company?
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Remove flag
Fl
a This is under Final Due Diligence and process up to submit a binding bid step, wherein the
g
investment deal team and its consultant finalizes and negotiates the preferred terms and
g
e conditions in regards to bidder's specific requests. Also, discussing and answering the inquiries of
d financing banks to be performed by the deal team would be executed to uphold clarity and build
comfortability in their debt commitment which would results to the Final Binding Bid.
Question 9 How may a financial sponsor realize gains in a portfolio company investment via a sale to a strategic
Answer saved acquirer?
Marked out of
1.00
Remove flag
Fl
a A financial sponsor realize gains in a portfolio company investment via a sale to a strategic
g
acquirer through:
g
e - Its immediate liquidity event
d
- Intending to hold the acquisition over the long-term in order to achieve a competitive
advantage and market share
- When strategic buyer is a non-PE firm while the acquisition is in the buyer's strategic interest

Thus, the trade would have the highest sale price which is the preferred exit option of an investor
under LBO.
Question 7 Fundraising for PE investments has been much more promising after 2008 because of investors having
Answer saved more capital to invest in private equity.
Marked out of
1.00 Select one:
Remove flag True
Fl
a False
g
g
e
Question
d 6 How can private equity firms maximize a company’s value?
Answer saved
Marked out of
1.00
Remove flag
Fl Private equity firms maximize a company's value by:
a
g
- Outsourcing finance enhances growth
g
- Putting efficiency as a high priority
e
d - Enhancing the role of technology and software
- Having a great access to trends and beneficial information
and many more that aims to show effectiveness and progress.
Question 5 Describe what happens after the first investment committee meeting?
Answer saved
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1.00
Remove flag
Fl The first investment committee meeting is under the Deal Alert (first review with Investment
a Committee) and after that, Non-Binding Letter of Intent (LOI) or First Round Bid happens, in here,
g
the investment team would present the target company together with LOI, introducing a more
g
e detailed proposal of purchase price, proposed capital structure post-acquisition, and others
d which would lead to the choosing of few bidders based on key considerations.
Question 3 This legal due diligence looks at past and current material contracts.
Answer saved

1.00
Remove flag
Fl Property, plant and equipment
a
g

g
e
Material contracts
d
Corporate filings
Environmental
Human resources
Question 1 Performance inventive fees of PE firms represents what percentage taken from exited investments.
Answer saved

1.00
10%
Remove flag
Fl 15%
a
g
g 20%
e
d 25%
Question 15 Firms that do hire analysts straight out of college will offer those analysts roles focusing more on logistical
Answer saved tasks, such as participating in conference calls, reviewing data and legal documents, and supporting the
Marked out of associate and vice president with internal investment materials.
1.00

Fl
True
a
g False
g
e
d
Question 14 Identify the typical structured steps for evaluating and completing a new private equity investment
Answer saved opportunity.
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Remove flag
Fl
a The typical structured steps for evaluating and completing a new private equity
g
investment opportunity are:
g
e 1. Sourcing of an investment opportunity
d
2. Investment process up to signing
3. Investment process from signing to closing
Question 13 A good LBO candidate characteristic is exemplified by high barriers to entry, high switching costs, and
Answer saved strong customer relationships.
Marked out of
1.00 Select one:
Remove flag Multiple areas to create value
Fl
a
g
g
e Strong management team
d

Strong market position and sustainable competitive advantage
Question 12 How can portfolio companies benefit from private equity firm relationships?
Answer saved
Marked out of
1.00
Remove flag
Fl Portfolio companies benefit from private equity firm relationships in a way that it helps
a them establish the suitable business model for them to achieve its true potential, that
g
serves as portfolio's guide in being an effective and efficient company that is open for a
g
e lot of opportunities.
d
Question 9 A good LBO candidate characteristic has a balanced and diverse growth strategy, so that a company’s
Answer saved success is not completely reliant on one driver.
Marked out of
1.00 Select one:
Remove flag Strong market position and sustainable competitive advantage
Fl
a
g
g
e Multiple areas to create value
d
Question 8 A characteristic of an LBO firm that is crucial to success as private equity firms will provide strategic
Answer saved guidance but will almost exclusively rely on management to execute their operating strategy.
Marked out of
1.00 Select one:
Remove flag Strong management team
Fl
a
g
g
e Low capital expenditure requirements
d
Multiple areas to create value

Question 7 This PE investments can add significant value in order to help companies realize their market potential
Answer saved and become market leaders in their respective industries.
Marked out of
1.00 Select one:
Remove flag distressed buyout
Fl
a
g
mezzanine financing
g
e venture capital
d
growth capital
leveraged buyout
Question 6 In 2012, private equity buyouts were again in billions surpassing the 2005-2007 boom years.
Answer saved

1.00
True
Remove flag
Fl False
a
g
g
Question
e 5 A private equity firm (or group of private equity firms) acquires a company using these as the majority of the
d
Answer saved purchase price.
Marked out of (WRONG)
1.00
LEVERAGED BUYOUT
Remove flag
Fl FINANCIAL SPONSOR
a
g
g
Answer: LBO
e
d
Question 3 A good LBO candidate characteristic requires having relatively low exposure to seasonal fluctuations in
Answer saved cash flows, as well as low sensitivity to cyclical fluctuations.
Marked out of
1.00 Select one:
Remove flag Multiple areas to create value
Fl
a
g
g
e Stable, recurring cash flows
d
Low capital expenditure requirements Favorable industry trends
Question 2 A main area of financial due diligence that looks into IT issues can cause a significant block in a smooth
Answer saved transition if the systems are not reviewed correctly and comprehensively.
Marked out of
1.00 Select one:
Remove flag Normal working level of capital
Fl
a
g
Debt and debt-like items
g
d
Quality of earnings
Tax structure
Human resources
Question 11 How could private equity firms help change and improve their portfolio companies?
Answer saved
Marked out of
1.00
Remove flag
Fl Private equity firms help portfolio companies by suggesting and introducing revisions in
a regards to their business model that unfolds their true potential for future development.
g
g
e
d
Question 10 This legal due diligence looks into various benefit plans set up, which must be evaluated as the acquisition
Answer saved is taking place
Marked out of
1.00 Select one:
Remove flag Corporate filings
Fl
a
g
g
d
Material contracts
Human resources
Environmental
Question 9 After reviewing the management's presentation and initial discussions, what would the investment team
Answer saved do and what would be its purpose?
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Remove flag
Fl
a The investment team would come up into a decision which dictates whether the business
g
is still going on track or not, subsequently, the purpose of this is to formulate techniques
g
e on how to improve the business' stability and profitability.
d

Question 4 Match the category with the main assumptions in preparing for an LBO modeling test.
Answer saved
Marked out of Transaction funding Debt/Equity funding %

1.00
Remove flag Debt capital structure Debt funding mix

Fl
a Sources and uses
g
Cash / Transaction expenses
g
e
Exit assumptions Time horizon
d
Growth projections Management model
Entry assumptions Earning metric
Question 1 A main area of financial due diligence that assumes that the company needs a normal level of working
Answer saved capital to remain in business, and thus removes it from the purchase price.
Marked out of
1.00 Select one:
Remove flag Quality of earnings
Fl
a
g
Human resources
g
e Normal working level of capital
d
Tax structure
Question 10 After having detailed conversations with the management team on all of the main drivers behind the
Answer saved business, what will the investment team do?
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Remove flag
Fl
a By that time, the investment team would undergo into their decision making process,
g
wherein they would decide whether to go for it or not, therefore, management team's
g
e skills must be great in order to succeed in making the investment team rationally
d evaluate what's good for them and for the business.

Question 8 Why can a financial sponsor often sell a portfolio company to another financial sponsor in a leveraged
Answer saved buyout transaction?
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1.00
Remove flag
Fl
a A financial sponsor frequently sells a portfolio company to another financial sponsor
g
using LBO because this kind of transaction is flexible and more profitable in the long run
g
e as the debt balance is lowered and the company's value would rise, enabling growth to
d take place.
Question 2 How can financial sponsors educate management teams and help implement the industry’s best practices
Answer saved for portfolio companies?
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Remove flag
Fl
a In terms of Experience Running Companies, financial sponsors could guide ordinary
g
entrepreneurs towards being exemplary through introducing to them the best strategies
g
e for sales optimization, pricing, cost efficiencies, and other crucial management
d techniques that would mold them in becoming professional management teams. Also,
sponsors might use re-assigning to the team in order to further open up opportunities of
growth within. Thus, financial sponsors educate and align a team to heighten its
effectiveness in running the business.
Question 15 In these transactions, a financial sponsor or a consortium acquire the target company using debt
Answer saved instruments for the majority of the purchase price.
Marked out of
1.00 Select one:
Flag question growth capital
N
ot
leveraged buyout
fla
g
g distressed buyout
e
d
mezzanine financing
venture capital
Question 14 It has less restrictive covenants or limitations, a longer time to maturity, and no required amortization
Answer saved payments.
Marked out of
1.00

Flag question Select one or more:
N
ot High yield debt
fla
g Equity
g
e
Subordinated debt
d
Senior debt
Question 13 RJR Nabisco’s deal during the 1980s was a substantial success for the investors who bought the company.
Answer saved

1.00
True
Flag question
N False
ot
fla
g
Question
g 12 The company that was considered to have made the first leveraged buyout in history with his purchase of
e
Answer saved Carnegie Steel Company in 1901 from Andrew Carnegie and Henry Phipps for $480 million.
d
Marked out of
1.00 Select one:
Flag question J.H. Whitney & Co.
N
ot
fla
Kohlberg Kravis Roberts
g
g J.P. Morgan
e
d
American Research and Development Corp.
Question 11 A good LBO candidate characteristic with low maintenance capital expenditure requirements providing
Answer saved management more flexibility in terms of how it can allocate the company’s capital and run its operations.
Marked out of
1.00 Select one:
Flag question
N
Multiple areas to create value
ot
fla
g
g Low capital expenditure requirements
e
d Favorable industry trends
Question 9 This type of PE investments can help reduce the overall required rate of return on the capital used to
Answer saved execute the LBO, by lowering the required equity investment, and thereby make some LBO deals feasible
Marked out of that otherwise were not.
1.00

N
venture capital
ot
fla
g leveraged buyout
g
e mezzanine financing
d
distressed buyout
growth capital

Question 7 A main area of financial due diligence that entails providing a detailed analysis of the federal, state, local,
Answer saved and international tax situation.
Marked out of
1.00 Select one:
Flag question Information technology
N
ot
fla
Human resources
g
g Tax structure
e
d
Quality of earnings
Normal working level of capital
Question 6 It has the most junior portion of the capital structure.

Answer saved

1.00
High yield debt
Flag question
N Subordinated debt
ot
fla
g Equity
g
e Senior debt
d
Question 4 This type of PE usually involves investor compensation in the form of interest combined with upside
Answer saved participation.
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Flag question mezzanine financing
N
ot
fla
growth capital
g
g distressed buyout
e
d
leveraged buyout
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Question 1 A private equity firm’s performance fees are also called incentive fees, carried interest or commission.
Answer saved

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True
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N False
ot
fla
g
Question
g 10 What are the three primary methods used to increase the exit value realized by the equity holders in an
e
Answer saved LBO?
d
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a The three primary methods used to increase the exit value realized by the equity holders
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in an LBO are:
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e - An IPO
d
- A sale to a strategic buyer
- An another LBO

Question 7 What is a preliminary investment memorandum?

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Fl This is also known as PIM, a memorandum that intends to provide overview of the
a bidding process and opportunities that could be gathered by the potential investors,
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enticing them to present their Expression of Interest.
g
e
d
Question 6 Smaller firms will often promote associates to senior associates, and those firms in general tend to
Answer saved provide less opportunities for internal promotions to more senior roles.
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a False
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g
e
Question
d 4 Select which are included in an associate's daily responsibilities.
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discuss any new events occurring in the industry or sector you cover
Remove flag
Fl discuss your assumptions and the feasibility of the scenario of an updated LBO
a
g
model
g
e source investment opportunities
d
conduct negotiations with investment banks
summarize the findings of a financial due diligence report in an internal

memorandum
submit a Letter of Intent (First Round Bid) to possibly acquire the relevant business
Question 15 In this type of buyout, a private equity firm purchases a financially agitated company below market value
Answer saved with the intention of divesting the company in the future for a higher value.
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Flag question growth capital
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fla
distressed buyout
g
g leveraged buyout
e
d
mezzanine financing

venture capital
Question 14 This legal due diligence includes looking at software or hardware agreements with external parties,
Answer saved contractually obligated product features or service level agreements, license agreements, and other
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Human resources
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g Material contracts
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e Health and welfare plans
d
Environmental
Corporate filings
Question 13
Answer saved Legal due diligence is focused on confirming that the target company is not subject
Marked out of to any future liabilities including regulatory issues, threatened or ongoing lawsuits, and unusual or
1.00
onerous contract provisions.
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ot
fla
g
g
Question 12 A due diligence question that includes understanding the “stickiness” of customers and the company’s
e
d
Answer saved reliance on suppliers.
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Flag question Financial performance
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g Competitive landscape and market position
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d
Capital requirements of the business
Question 11 To make the accurate assumptions, you will have to understand the types of companies the sponsor likes
Answer saved to invest in and their investment strategy, such as the purchase price, capital structure, growth and margin
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True
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fla False
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g
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Question 9
d
A typical fund for a private equity firm has a total lifespan of approximately how many years?
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5 years
Flag question
N 10 years
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fla
g 15 years
g

e 20 years
d
Question 8 As PE firms grow their capital base from funds, they are able to grow the firms, as a result of the increased
Answer saved fees received for managing the investments in the various funds they are managing.
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ot False
fla
g
g
Question
e 5 A main area of financial due diligence that looks into that which affects payroll and that in turn affects the
d
Answer saved taxes for which the company is responsible.
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Flag question Debt and debt-like items
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fla
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g Information technology
e
d
Quality of earnings
Human resources
Tax structure
Question 3 This legal due diligence process is to confirm that all corporate filings have been filed correctly and to
Answer saved understand the legal organization of the company, such as whether there are any strange corporate
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g Material contracts
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e Corporate filings
d
Human resources
Environmental
Question 2 A main area of financial due diligence that confirms the historical earnings of the company excluding non-
Answer saved recurring costs/expenses, as this will affect the valuation of the company.
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fla
g
g
e
d
Tax structure
Quality of earnings

Human resources
Question 1 The most notorious leveraged buyout was Kohlberg Kravis Roberts’ buyout of which company for
Answer saved US$31.1B?
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Flag question RJR Nabisco
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ot
fla
Bain Capital
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g Carnegie Steel Company
e
d
The Carlyle Group
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12/3/21, 6:46 PM https://dnzmcext2.blogspot.

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Monday, 29 November 2021

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