MULTIPLE CHOICE QUESTIONS (1-10)
1. In Sarah Chen’s first exit (CloudSync), what was her total consideration structure? a) $7.2M all cash b) $10.8M total: $7.2M base + $3.6M earnout potential c) $8.4M total: $5.0M cash + $3.4M earnout d) $12.0M total: $7.2M base + $4.8M earnout
2. What percentage of CloudSync’s sale was cash at closing? a) 60% b) 50% c) 40% d) 70%
3. What was Sarah’s total realized proceeds from the CloudSync sale after earnouts? a) $7.2M b) $7.92M c) $8.5M d) $10.8M
4. What hidden compulsion was driving MidTech’s urgency to acquire CloudSync? a) Their CEO was retiring and wanted to close a deal b) Their largest customer issued an RFP requiring workflow automation capabilities within 90 days c) A competitor was also trying to acquire CloudSync d) They had excess capital that needed deployment
5. In Sarah’s second exit (DataBridge), what was her ARR and the final sale multiple? a) $1.8M ARR at 6.0x b) $2.0M ARR at 6.5x c) $2.2M ARR at 6.1x d) $2.5M ARR at 5.4x
6. How much time did Sarah spend building relationships with potential buyers before formally engaging her M&A advisor for DataBridge? a) 6 months b) 9 months c) 12 months d) 18 months
7. What was Sarah’s final sale price for DataBridge? a) $12.2M b) $13.0M c) $13.5M d) $14.0M
8. What percentage of the DataBridge sale was cash at closing? a) 85% b) 90% c) 95% d) 100%
9. How much additional value did Sarah capture in her second exit compared to her first? a) $4.2M b) $5.0M c) $5.58M d) $6.1M
10. According to the post, which FMV assumption is described as “the most ridiculous”? a) Willing parties acting without compulsion b) Arm’s length transactions c) Informed and prudent parties with equal information d) Cash payment terms
EXPLANATORY QUESTIONS (11-15)
11. Compare and contrast Sarah’s two exits. What specific mistakes did she make in the first exit, and how did she systematically correct each one in the second exit?
12. Explain the three-stage information control strategy Sarah used in her second exit. Why is controlling information flow more valuable than the FMV assumption of “equal information”?
13. The post argues that “arm’s length” transactions actually destroy value rather than create it. Explain this counterintuitive concept using examples from Sarah’s experience.
14. MidTech had several “hidden compulsions” and “information advantages” that Sarah didn’t know about during her first exit. List at least four of these, and explain how each one affected the transaction outcome.
15. Describe how Sarah created “Fear of Missing Out (FOMO)” among buyers in her second exit. What specific tactics did her M&A advisor use to generate competitive pressure?
ANSWER KEY
Multiple Choice Answers (1-10)
b - $10.8M total: $7.2M base + $3.6M earnout potential
c - 40%
b - $7.92M
b - Their largest customer issued an RFP requiring workflow automation capabilities within 90 days
c - $2.2M ARR at 6.1x
c - 12 months
c - $13.5M
c - 95%
c - $5.58M
c - Informed and prudent parties with equal information
