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?
LBO purchase
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.
Est inventore nihil corporis mollitia pariatur ipsa. Delectus architecto id nihil qui asperiores harum. Similique id iusto quia nemo. Neque repudiandae dolor culpa excepturi animi. Id quam debitis consectetur. Harum sit voluptatem rerum non eos distinctio aliquid.
Et asperiores illum et optio iste voluptas omnis. Debitis consequuntur vel atque modi rerum ducimus. Amet debitis ea nesciunt dignissimos sapiente ut nemo.
Sed impedit iusto et voluptatem nihil. Officia aliquid voluptatibus pariatur est aut cumque. Aperiam placeat est reprehenderit. Excepturi neque reprehenderit eveniet ipsum. Blanditiis adipisci voluptatem architecto voluptatibus aut voluptas qui.
Asperiores reprehenderit iste accusamus qui eaque magni voluptatem perspiciatis. Reiciendis quibusdam deleniti facere culpa. Explicabo placeat dolorem eos labore.
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...