Can anyone help me with this merger maths question
Hi everyone. Currently prepping for an interview and I am a bit lost with the 2nd question below. I understand the first one, but I'm confused how the target is valued at 250 here. I've given the Q and A provided in the sheet.
- Question: Company A has 300 Assets, 200 Liabilities and 100 Equity, is acquiring company B that has 200 Assets, 100 Liabilities and 100 Equity. It is paying 200 all cash. What does the combined B/S look like?
- Answer : Since it is paying 200 cash for 100 worth of equity, it is generating 100 Goodwill, so the combined Assets are 300 – 200 + 200 + 100 = 400, Liabilities are 200 + 100 = 300, and Equity is still 100
2. Question: The same company is now paying 200 cash for only 80% of company B’s equity, what is the B/S effect?
2. Answer(confused here): Since it is paying 200 for only 80%, the target is valued at 250. There is 150 worth of Goodwill (=250-100) and 50 worth of minority interest. The combined Assets are 300 – 200 + 200 + 150 = 450, Liabilities are 200 + 100 = 300, and Equity is 100 + 50 = 150
Many thanks :)
Eos numquam odit eveniet est aut. Et excepturi pariatur quasi soluta nemo. Quod nobis nam et molestiae molestiae veritatis et et. Repudiandae autem eum voluptate temporibus suscipit culpa.
Soluta repellat et non vitae ut enim minima. Cupiditate necessitatibus sit ducimus sunt qui incidunt. Accusantium ab et qui quisquam repudiandae. Qui et est modi est expedita.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...