Question 2 - Set up

In this lesson

1. 0:00 AFM practice exam debrief introduction
2. 1:00 Question requirements and planning overview
3. 2:35 Have Co and Strand Co company background
4. 4:03 Financial data and acquisition proposals
5. 5:59 Part A: Synergy types and revenue sources
6. 6:39 Part B: Business valuation and premium calculation
7. 8:43 Part C: Premium per share and payment methods

About this lesson

The question asks you to distinguish between types of synergy and their sources, calculate acquisition premiums using two different valuation methods, and evaluate payment options to justify the best acquisition approach. The scenario involves Have Co, a successful electronics manufacturer, acquiring Strand Co, a private biotechnology company with valuable intangible assets. You'll need to apply the excess earnings (intangible value) method based on Strand Co's perspective, and a price-earnings approach incorporating synergy benefits from Have Co's viewpoint. The question also requires you to compare two payment methods—a straightforward cash offer and a cash-plus-convertible-bond structure—calculating the percentage premium per share in each case. This question tests your ability to combine theoretical knowledge of synergy types with practical valuation techniques, a key skill for AFM. The debrief walks you through the requirements systematically, breaking down the 20 available marks across three parts: written analysis of synergy (6 marks), business valuation calculations (7 marks), and comparative payment analysis with justification (7 marks). You'll see how to structure your approach, manage your time effectively, and work through both straightforward and more complex calculations step by step.

Duration: 10m