Free FINRA Series 79 (Investment Banking Representative) Mergers and Acquisitions, Tender Offers and Financial Restructuring Practice Questions
Mergers and acquisitions, tender offers and financial restructuring on the FINRA Series 79 exam covers sell-side and buy-side M&A processes, accretion and dilution analysis, fairness opinions, the Williams Act tender offer rules (Regulations 14D and 14E), proxy solicitation, and Chapter 11 and Chapter 7 bankruptcy (FINRA).
In a liquidation, which class of claimants stands highest in the priority waterfall?
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Correct Answer: C
Solution
C is correct. The bankruptcy priority waterfall pays senior secured creditors (senior debt lenders) first because their claims are backed by collateral and rank ahead of all junior secured, unsecured, mezzanine, preferred, and common interests. That priority runs to collateral value. Any deficiency is unsecured, so other creditors may recover before the lender is paid in full.
Question 2
Medium
Which statement best describes how a flip-in shareholder rights plan (poison pill) operates as a takeover defense?
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Correct Answer: B
Solution
B is correct. A flip-in poison pill is triggered when a hostile acquirer accumulates shares beyond a specified threshold (often 10% to 20%). Upon triggering, all shareholders except the acquirer gain the right to purchase additional shares at a steep discount. The resulting issuance massively dilutes the acquirer's ownership stake and economic interest, making the takeover prohibitively expensive and forcing the bidder to negotiate with the board.
Question 3
Hard
A public acquirer launches a hostile exchange offer, offering its own newly issued common stock directly to the target's shareholders in exchange for their shares. Which regulatory framework governs this transaction?
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Correct Answer: C
Solution
C is correct. An exchange offer is simultaneously an offer of the acquirer's securities and a tender offer. Because new shares are being offered to the public, the acquirer must register them under the Securities Act, typically on Form S-4, and its offering communications fall under Rules 165 and 425. Because shareholders are being solicited to tender, the transaction is also subject to the Williams Act tender-offer regime—Regulations 14D and 14E and the Schedule TO filing—so both frameworks apply together.
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