DCF - Include Debt Financed acquisitions?
Hi All,
I am creating a DCF and had a relatively basic question. The Company plans to acquire another company in the forecast period and will raise an equivalent amount of debt to finance the transaction. Is this a wash? Should I increase CapEx by the amount of the acquisition, or not since it will be debt financed?
Thank you!
if you include the acquired company's operations into your forecast then you should attach the related debt/equity for the transaction.
The method of financing does not matter, except for the change in WACC as a result of capital structure change. So yes, if it's a Capex, then it needs to be included as a Capex.
Unfortunately, if the WACC changes significantly at all, you shouldn't be using a traditional DCF for the valuation.
Laudantium accusamus id itaque aliquam est maiores commodi. Iusto sequi aut facere voluptatem. Harum autem enim commodi sed nostrum fugit quia. Asperiores libero nisi esse nulla.
Velit fuga qui aperiam quo est. Quas nulla eum nihil quas qui dolorem qui amet. Deleniti velit quaerat omnis qui. Atque ipsam quas rerum laborum repellendus. Voluptatem consequuntur dolorem sed.
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...