LBO modeling question
IB
(Chimp, 12
Points)
on 7/15/12 at 11:18am
Hi, I am now working on a deal that our fund is going to buy out a control stake of a listed company and privatize it. However some shareholders are rolling over their stake so for this sort of situation when we push down the new debts do we need to compensate the rolled over shareholders in some form?
Thanks.





No. Unless you have a funky
No. Unless you have a funky structure, roll shareholders will receive their compensation via a greater percentage of the pro forma equity value. Example:
Enterprise value at entry = $100
Debt at entry = $0
Equity value at entry = $100
Roll equity ownership = 20%
Value of roll equity stake = $20
Debt scenario 1
Pro forma debt = $0
Pro forma equity (i.e. the total equity check) = $100
Roll ownership = $20 / $100 or 20%
Debt scenario 2
Pro forma debt = $50
Pro forma equity = $50
Roll ownership = $20 / $50 or 40%