LBO Model Question
(Baboon, 166
Points)
on 1/2/13 at 10:32pm
In a real-world LBO model, do you bother to mark the target's balance sheet to fair value? Or is it more trouble than it's worth?
Just wondering what is done in practice.





You'll get lawyers and
You'll get lawyers and accountants to do an estimate of it when you're acquiring a company and doing a step-up in an asset purchase, for instance. Never had to do it in banking though.
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BossMode
you will have that as part of
you will have that as part of the model but won't usually need to come up with the figures on your own unless you use some basic assumptions.
I've never done it.
I've never done it.
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sick_willy: You'll get
You'll get lawyers and accountants to do an estimate of it when you're acquiring a company and doing a step-up in an asset purchase, for instance. Never had to do it in banking though.
The step-up with a 338 or pure asset purchase will have (could have I should say) implications on the acquirers tax basis which can have a big impact on your B-Tax / A-Tax val. delta. However, in a standard LBO modeling situation, you're only concerned w/ debt service and mandatory repayment so it's less of an concern.
Also, BV is strictly
Also, BV is strictly (generally) an account number. However, some BS items such as derivative assets / liabilities should be adjusted accordingly if you are making write-ups/downs else where on your financial model.
Stringer
You'll get lawyers and accountants to do an estimate of it when you're acquiring a company and doing a step-up in an asset purchase, for instance. Never had to do it in banking though.
The step-up with a 338 or pure asset purchase will have (could have I should say) implications on the acquirers tax basis which can have a big impact on your B-Tax / A-Tax val. delta. However, in a standard LBO modeling situation, you're only concerned w/ debt service and mandatory repayment so it's less of an concern.
It'll impact your amortization and therefore the amount of cash taxes you need to pay
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BossMode