I am looking at this M&A model, and it says that a certain percentage of the cash used in the leverage buyout is coming from the target companies own balance sheet. What is the logic behind this? How can you use a company's own money to buy itself?
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Because what sense does it make to pay $50 to acquire $50 of another company's cash? None. So the target company's cash is used to reduce the acquisition price.
^^^^^^^
Right, okay that's pretty simple when you put it that way. Thanks
In the end you also pay $1 extra per $1 cash on the balance sheet. Its a positive in the bridge from enterprise value to equity value.
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