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!
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