Series 79 practice questionmediumPrecedent Transaction Analysis
When analyzing precedent transactions, why might a deal that was paid entirely in stock command a lower observed premium?
- AStock deals are always less attractive to sellers
- BStock deals result in lower synergies
- CStock consideration exposes sellers to post-transaction market risk✓ Correct answer
- DStock deals have higher regulatory hurdles
Explanation
Why C — Stock consideration exposes sellers to post-transaction market risk
Sellers accepting stock bear market risk, often leading to lower premiums. Assuming all-stock deals are less attractive regardless of context is a misconception.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Collection, Analysis & Evaluation of Data questions
- Which of the following is generally true when interpreting the mean and median multiples from a set of peer companies?
- If a company capitalizes a larger portion of operating expenses instead of expensing them, all else equal, which…
- Which component of WACC is adjusted for the company's marginal tax rate?
- If a company reports significant deferred revenue, what does this indicate about its cash flow?
- If an acquirer expects $40 million in annual synergies from a deal, what happens to accretion/dilution analysis if…
- Why might the multiples from precedent transactions completed during a bull market be less reliable for current…
- When building a DCF, what is the impact of assuming a higher terminal EBITDA multiple in the exit multiple method?
- A positive change in working capital from one year to the next most likely indicates: