3-Statement LBO Stub Period Adjustment

How would you adjust a 3-statement LBO (including B/S) for a mid-year transaction? 

Let's assume:

  • Fiscal year: Jan-25 to Dec-25
  • Transaction date: Jun-25
  • Currently the model is an annual model (i.e. FY24 and FY25)

Would you:

  • Roll forward the Dec-24 B/S to Jun-25 by essentially multiplying all cashflows by 50% e.g.:
    • Only account for 50% of Net Income
    • Assume only 50% of investments (e.g. Capex, NWC changes etc.) occur
    • Only 50% of D&A occurs
    • i.e. only 50% of the net cash generated
  • Use the mid-year Jun-25 B/S to transact-off (i.e. for EV - EqV Bridge, S&U)
  • Adjust the mid-year Jun-25 B/S for LBO impacts to get a PF Jun-25 B/S (e.g. debt refinancing, goodwill, equity write-off, capitalised financing fees etc.)
  • Roll forward the PF Jun-25 B/S to Dec-25
  • Resume annual model

How would you adjust the debt schedules? Would you:

  • Assuming transaction mid-year at Jun-25, only 50% of the annual debt amortisation and interest expense would be accounted for?

For returns analysis, that's pretty clear to me. 

Any guidance would be much appreciated! Thanks!

1 Comments
 

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