EV bridge question

I have a doubt regarding exercises on TEV/EqV bridge that I was asked in an interview: 

Why do Equity Value on the bridge stays the same when I overpay for the Shareholder's Equity of the target? While it decreases (making more sense to me, as you account for a 'distruction' of value) when you overpay for the Enterprise Value of the target? 

See the below examples? 

1. Let’s say the company raises $200 million in Debt to acquire another company for a

purchase price of $200 million. The other company’s Common Shareholders’ Equity is $100 million. 

Breaking Into WallStreet questions say that you EV increases by 200, because Goodwill and other intangibles are both core business assets, therefore reflected in TEV. 

2. But let's say a company pays $200 million in debt to acquire another company's TEV= $100 million. 

In this case EV pro forma would be the sum of the two enterprise values. Hence: 

TEV: + 100; Net debt: + 200; EqV reflects overpaying by decreasing:-100. 

Can't get my head around the reason of this one, I understand it is for the fact that TEV of the target includes non-core assets whereas EqV does not, but any clarification would be great. 

Cheers, 

1 Comments
 

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