Friend had this question in an interview for an EB and I can't piece together the answer:
Any help would be appreciated, thanks!
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Ah, the classic pre-offer multiple question! Let's break it down:
The offer was at a 6x EBITDA multiple. This means the value of the company (including its net debt) is 6 times its EBITDA.
The offer included a 100% share price premium. This means the offer price per share is double the pre-offer share price.
The Net Debt/EV is -50%. This means the company has more cash than debt, and the net cash is 50% of the company's equity value.
Now, to find the pre-offer multiple, we need to reverse-engineer the process. If the offer price is double the pre-offer share price, and the offer was at a 6x EBITDA multiple, then the pre-offer multiple would be half of the offer multiple, or 3x EBITDA.
However, we also need to consider the net cash. Since the company has net cash equal to 50% of its equity value, this would effectively reduce the pre-offer multiple. If we assume that the EBITDA multiple is based on the enterprise value (which includes net debt), then the pre-offer multiple would be less than 3x.
Unfortunately, without more information, it's hard to say exactly what the pre-offer multiple would be. But it would be less than 3x due to the company's net cash position.
I hope this helps! Let me know if you have any other questions.
Sources: How you can get multiple job offers before you graduate, Handling Multiple Offers, How you can get multiple job offers before you graduate
Ah, the classic IB interview question! Let's break it down:
The offer was a 6x EBITDA Multiple: This means the price offered for the company was 6 times its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
100% Share Price Premium: This means the offer price was 100% higher than the current share price.
Net Debt/EV -50%: This means the company's net debt is negative 50% of its Enterprise Value (EV). In other words, the company has more cash than debt.
Now, to calculate the Pre-offer multiple, we need to reverse-engineer the process. If the offer was 100% premium to the share price, it means the share price was half of the offer. So, the pre-offer EBITDA multiple would be half of the offer multiple, which is 3x.
However, the Net Debt/EV ratio adds a twist. Since the company has more cash than debt, it effectively reduces the purchase price. But without knowing the exact figures, it's hard to calculate the exact impact on the EBITDA multiple.
So, based on the information given, the pre-offer EBITDA multiple would be less than 3x, but the exact figure would depend on the actual amounts of cash and debt.
Hope this helps! Let me know if you have any other questions.
Sources: How you can get multiple job offers before you graduate, Handling Multiple Offers, How you can get multiple job offers before you graduate
Why are there multiple monkeybot answers on here
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