Purchase price allocation - what am I doing wrong?
Hi,
I am trying to create a simplified example but it doesn't balance for some reason. Can anybody please tell me why?
Sources & uses
TEV 100
Existing Debt 20
Leverage 30
Sponsor Equity 50
Original target balance sheet:
Asset: no goodwill. Just current asset of 40
Equity of 20 and existing debt of 20.
PF balance sheet:
Goodwill of 60 + existing asset of 40 = 100 PF
L&E
Liabilities = new debt of 30
Equity = wipe off old equity of 20 and add new sponsor equity of 50
Then i get $80 for L&E?
Can somebody please help...
What're you doing to existing debt? Sources and uses don't match
Debt gets prepaid in case of acquisition.
Uses: Repayment of existing debt (20), Acquisition (80) | Sources: Leverage (30), Sponsor Equity (70)
PF BS: Goodwill (60) + Existing Assets (40) | Leverage (30) + Equity (70)
Yep this is correct. B/S doesn’t balance because S&U doesn’t balance.
Either debt gets repaid in full or can get rolled if docs allow for it and creditor wishes to stay. Regardless has to be accounted for as a use in S&U and plugged accordingly as a source using equity or rolled debt.
Explicabo dolor autem rerum eos et aliquam et eum. Illo commodi mollitia cumque expedita et totam. Accusantium qui quae voluptatibus qui quidem quas voluptates sequi. Nobis error amet repellendus earum laboriosam fugiat. Sed quae distinctio nulla saepe porro omnis possimus.
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...