Acquisitions Interview Questions

Acquisitions interview questions

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Total Questions: 5

1. What is the difference between a merger and an acquisition?

A. No real difference—the terms are synonymous

B. An acquisition is a merger involving a hostile takeover

C. In a merger, there is never any acquirer or target—two companies simply fuse

D. A merger is a type of acquisition in which the acquirer and the target combine to become one legal entity

Correct Answer is : A merger is a type of acquisition in which the acquirer and the target combine to become one legal entity

2. In what ways can vested stock options be handled when the company is acquired?

A. They can be converted into restricted stock units or stock appreciation rights, depending on the terms of the stock plan

B. They can be backdated to align their grant price with the grant price of the acquirer’s options

C. They can be rolled over into options in the acquirer according to an exchange ratio

D. Any of the above

Correct Answer is : They can be rolled over into options in the acquirer according to an exchange ratio

3. In what ways can restricted stock/RSUs be handled when a company is acquired?

A. The vesting can be accelerated to occur at the time of the deal’s closi

B. The grants can be converted into restricted stock/RSUs in the buyer with a new number of shares/units but the same vesting schedule

C. The unvested grant can be cashed out

D. Any of the above

Correct Answer is : Any of the above

4. What is the typical tax treatment of stock options in an acquisition?

A. If the options are preserved after the deal, there is no tax consequence, but if they are cashed out directly to you, the payment is taxed as ordinary income

B. If the options are preserved after the deal, there is no tax consequence, but if they are cashed out directly to you, the payment is taxed as capital gain

C. You pay taxes on the portion of the option value commensurate with the number of working days between the grant date and either the vesting date or the closing date of the M&A deal (whichever is first)

D. You pay taxes on the total value of the options, both unvested and vested, as determined by a standard option-valuation model (e.g. Black-Scholes or binomial)

Correct Answer is : If the options are preserved after the deal, there is no tax consequence, but if they are cashed out directly to you, the payment is taxed as ordinary income

5. What is the typical tax treatment of restricted stock/RSUs in an acquisition?

A. If vesting continues, there is no tax consequence, but if the grant is cashed out directly to you, the payment is taxed as capital gain

B. If vesting continues, there is no tax consequence, but if the grant is cashed out directly to you, the payment is taxed as ordinary income

C. If vesting continues, the value of the grant at the time of the deal's closing is taxed as ordinary income, but if the grant is cashed out directly to you, the payment is taxed as capital gain

D. If vesting continues, the value of the grant at the time of the deal's closing is taxed as capital gain, but if the grant is cashed out directly to you, the payment is taxed as ordinary income

Correct Answer is : If vesting continues, there is no tax consequence, but if the grant is cashed out directly to you, the payment is taxed as ordinary income

Acquisitions interview questions