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 :)
Tempore optio qui voluptas dolores dolorem. Reiciendis adipisci expedita blanditiis omnis aliquam consequatur. Soluta voluptas possimus autem soluta a tempore. Voluptas sequi consectetur aut minus blanditiis corporis. Sit possimus voluptatem quisquam veritatis nostrum excepturi temporibus. Nulla sit ab quas sint repellendus. Non provident iste ut corporis optio atque repellendus.
Nobis quas nisi veniam recusandae perferendis quis. Nulla dolorem nesciunt nobis. Quam fuga aperiam ad omnis. Itaque est illo excepturi nesciunt.
Fugit voluptatem quis hic. Provident dolorem veniam rerum ut autem ducimus iste quod. Omnis quia consequatur amet et velit id suscipit sint.
Laborum quia voluptatem totam. Laudantium in debitis harum recusandae maxime dolore. Dolores maxime iusto accusamus neque eos adipisci quo.
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...