CAIIB · Advanced Business & Financial Management · Module C — Valuation, Mergers & Acquisitions
CAIIB ABFM Unit 18 — Deal Structuring and Financial Strategies: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper III of the December 2026 cycle (Sunday 13 December 2026)
This is the free practice page for CAIIB ABFM Unit 18 — Deal Structuring and Financial Strategies (Module C — Valuation, Mergers & Acquisitions). The CAIIB Mock Centre holds 176 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABFM · Module C176 MCQs in the Mock Centre5 free belowPaper on 13 December
Key facts examiners test from this unit
Deal structuring, negotiation and the acquisition vehicle — a deal structure fixes both parties' rights and risks; the vehicle and post-closing form follow the buyer's goals.
Forms of payment — pay cash when your shares are cheap and control matters; pay stock when they are dear; bridge doubts with mixes, convertibles and earn-outs.
Tax structures in acquisitions — cash deals are taxable, stock deals can be tax-free; asset deals step up the basis but may tax sellers twice.
Changed since the textbook
MAT cut to 14% and made a final tax; Income-tax Act, 2025 in force (30 March 2026). The Finance Act, 2026 (enacted 30 March 2026) cut the Minimum Alternate Tax rate from 15% to 14% of book profit from tax year 2026-27 and made MAT a final tax: no new MAT credit accrues from 1 April 2026. Credit accumulated up to 31 March 2026 can be carried forward (15 tax years from when it first arose), and a company that moves to the concessional regime may set it off up to 25% of its tax liability. From 1 April 2026 the Income-tax Act, 2025 replaced the Income-tax Act, 1961, with its provisions renumbered. Source: EY Global Tax News
Revised ECB framework: larger limits, market-based cost and use for acquisitions of control (16 February 2026). The RBI's amended borrowing and lending regulations (notified 9 February 2026, in force 16 February 2026) raised the ECB limit to the higher of USD 1 billion outstanding or 300% of the borrower's net worth, set a minimum average maturity of 3 years (1–3 years for manufacturers up to USD 150 million), replaced the all-in-cost ceiling with market-based pricing (arm's length for related parties) and widened eligible borrowers to include LLPs. Source: EY: RBI has revised the borrowing and lending framework
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 176 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
Why may the acquirer's stock be a useful form of payment when the target is hard to value?
Why (c): When a target's value rests on hard-to-measure intangibles, new products or heavy R&D, paying in the acquirer's stock makes the sellers share in what happens after the deal, so they have less incentive to oversell. Stock is not free, since it dilutes existing holders, and its value moves with the acquirer's share price, so it does not fix what is paid. (a) is wrong: Stock dilutes existing holders, so it is not free. (b) is wrong: Due diligence is still needed. (d) is wrong: Stock's value moves with the acquirer's share price.
Question 2 of 5
What problem does a proration clause solve in a multiple-option bid?
Why (c): Because the acquirer cannot know how many holders will choose cash, a proration clause lets it determine when the offer starts the total cash it will pay; excess cash elections are scaled back pro rata. (a) is wrong: The exchange ratio is set separately. (b) is wrong: Holders choosing cash may receive part of their payment in stock. (d) is wrong: The clause allocates the cash rather than cancelling the offer.
Question 3 of 5
What happens to the tax basis of the acquired assets in a tax-free transaction?
Why (a): If the transaction triggers no taxes, there is no automatic increase in the value of the acquired assets to fair market value. (b) is wrong: The step-up comes with taxable asset purchases. (c) is wrong: The basis is not reduced. (d) is wrong: No such increase applies.
Question 4 of 5
When a share purchase gives the buyer control, how are the target's assets and liabilities shown in the consolidated statements?
Why (c): If the acquisition gives control, the target's assets and liabilities may be recorded at acquisition-date fair values in the consolidated statements, and the excess is goodwill. (a) is wrong: The price is not spread equally over the assets. (b) is wrong: Historical book values are replaced by fair values. (d) is wrong: Last audited values are not acquisition-date fair values.
Question 5 of 5
Why do current accounting standards record 100% of the target's assets and liabilities even when less than 100% is bought?
Why (d): Recording 100% of the assets and liabilities, whether 51% or 100% is bought, aids comparison across transactions and reflects that the acquirer manages all the acquired assets. (a) is wrong: The aim is comparability, not a larger goodwill figure. (b) is wrong: Buying a controlling stake below 100% is common and lawful. (c) is wrong: Minority holders need not sell.
0 of 5 answered.
Traps in this unit
A joint venture slows integration.
Merging a liability-laden target straight into the parent.
Convertibles may never convert.
Practise all 176 questions on Unit 18. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABFM Online Mock Centre unlocks all 4,000+ ABFM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.