Two technical questions I've not ben able to find covered using the search function - any help much appreciated!
1) Deal fees - do these relate to fees incurred by the buyer and/or the seller? E.g. imagine an 100m EV deal with buyside fees (buy-side M&A advisor, legal, top-up DD etc.) of 3% and sell-side fees (sell-side M&A advisor, VDD, VDR etc.) of 2%. What value of fees would appear in our S&U? 2m, 3m or 5m? Does this depend on whether the buyer contributes some or all of the VDD cost by "buying" the VDD?
2) How do you deal with mid-year deal dates in your models? e.g. a 31 December target being bought on 30 June - Would you show the returns profile on the balance sheet dates e.g. years 0.5, 1.5, 2.5...? Or would you try and show returns at whole year intervals and have to do some kind of calendarisation (e.g. 1yr hold, 2yr hold, 3yr hold..).
Thanks!
Bump
Only buy-side fees in S&U You're the buyer in a LBO model, so only buy-side fees. You do not buy/acquire the VDD just because it is in your S&U: you spend money (uses) on evaluating the business so in the end you need to have funding to pay those expenses. Financing fees often however are capitalised and amortised on the BS of the target.
Sell-side fees When sell-side fees are charged to the target, they will be treated as debt-like items and be subtracted from the equity proceeds of seller.
Stub year models Best practice imo is to build book year forecast and then create calander year P&L/CF from those based on the entry date (so year 1 will be running from entry date to entry date + 12 months). This however is quite cumbersome to build from scratch, and most banks will have a standard model to fix this. Alternative is to use book years and 'pay out' a year frac of the cash flow to the seller in year 1 in your model to compensate for that period. Investment date however would be the actual date of investment.
Very helpful, thanks
Ab veniam sit maxime. Excepturi officia unde autem et. Nulla sint occaecati quasi nam recusandae. Id consequatur earum et eos aspernatur commodi eius dolor. Ipsam totam non veritatis sit. Earum ducimus minima et fugit quia. Dolorem occaecati debitis libero nostrum rerum.
Iure hic tenetur beatae corporis eius beatae. Voluptatibus nihil omnis voluptas quidem magni aliquam. Iusto voluptatibus sint aut atque nam officia.
Veniam a et nihil vitae aut. Blanditiis labore soluta et sed. Commodi aut quas et sint occaecati.
Nam aliquid asperiores nesciunt non omnis nam impedit. Et qui maiores sunt dolorem nihil alias. Ex eaque voluptas ipsam ullam laudantium.
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...