FMA Sharing - HQM&A 1

How many members are there in HQ M&A team (including Leslie)?

• 3

• 4

• 5

• 6

What is the main role of the HQ M&A team?

• Search for Sea's potential investment deals

• Financial and legal due diligence of Sea's potential investment deals

• Financial valuation and modelling of Sea's potential investment deals

• Financial and tax due diligence of Sea's potential investment deals

What is NOT the difference between audit and financial due diligence (FDD)?

• Unlike audit, FDD does not involve any sample testing procedures (e.g. sample testing of transactions).

• Audit relies on only historical financial statements (FS), while FDD relies on only forecasted FS.

• The deliverable for audit is a GAAP/IFRS compliant FS, while the deliverable for FDD is a normalized FS.

• An audit mainly focuses on the financials of the company, while FDD is a comprehensive review of the Target's financials, operational and other functions.

What are some common valuation methods?

• Net asset method / asset-based valuation

• Discounted Cash Flow (DCF) valuation

• Market approach (using multiples)

• All of the above

In deriving the sustainable earnings of a Target from its historical P/L, which of the following need NOT be adjusted?

• Bonus that was recorded on cash basis (instead of accrual)

• One-off COVID subsidy from the government

• Historical rent expense incurred by Target, of which the rent will be discontinued post-acquisition

• Increasing salary expenses due to aggressive hiring by Target

What is NOT a component of net working capital?

• Cash

• Trade receivables

• Trade payables (non-interest bearing)

• Inventories

We intend to use US$10m to acquire a 15% stake in our Target company. What are the 2 key items that we need to perform FDD on?

• (1) Balance sheet and (2) P&L

• (1) P&L and (2) Cash flow

• (1) Balance sheet and (2) Cash flow

• No analysis required since non-controlling stake

Which Microsoft tool do I use in my work?

• Microsoft Excel

• Microsoft PowerPoint

• Microsoft Word

• All of the above