Series 79 practice questionhardSector Trends – M&A
A banker observes that strategic buyers in the software sector are consistently paying higher EV/EBITDA multiples than financial sponsors. The MOST likely reason is:
- ASector regulation favors financial sponsors
- BFinancing constraints for strategics
- CLower risk aversion by sponsors
- DSynergy realization by strategic buyers✓ Correct answer
Explanation
Why D — Synergy realization by strategic buyers
Strategic buyers often pay more due to anticipated synergies, which raises their willingness to pay higher multiples. Financial sponsors typically have stricter return requirements, not lower risk aversion, and regulation does not generally favor sponsors.
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