Maybe a stupid question but if you are calculating the IRR for a takeover of a public company, what do you include as a cash outflow in Year 0? Do you only include equity (market cap + premium), do you include transaction fees (bankers, lawyers, consultants), and do you include the assumed net debt?
For example, if the target company has a market cap of 100bn and you are paying a 30% premium, has a net debt position of 15bn and you assume transaction fees of 2bn, what would your initial cash outflow be?
A) 130bn of equity B) 132bn of equity and transaction fees C) 147bn of equity, transaction fees and net debt
and to complicate if further, if you are assuming the target's net debt, do you consider it to be a cash outflow in year 0 or do you assume you pay it in accordance with the debt schedule, i.e. some of the debt would be in year 0, some in year 1, year 2 etc? Do you handle it differently depending on if you assume or refinance the debt?
The above obviously can have a material effect on IRR but also on value creation and hence my question.
Appreciate any help on this!
Accusantium recusandae autem tenetur dolorem nulla. Nihil repellendus reiciendis inventore maxime voluptatem dignissimos. Enim qui rerum distinctio vel sed animi. Est corporis et vitae ullam non sed ducimus.
Eveniet autem nobis nemo. Animi quo sunt earum accusamus ullam. Non reiciendis vel autem deleniti in molestias totam doloribus.
Fugiat culpa eligendi minus doloribus. Sit assumenda reprehenderit consequuntur quaerat nostrum. Fuga quidem necessitatibus magni voluptatem asperiores. Eaque blanditiis culpa facilis voluptate est ut sed ratione. Dolorem est enim tempora aut qui ut. Qui maxime eius qui odit sunt. Delectus sint autem perferendis et suscipit velit.
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...