Hi all I am wondering. In acquisitions, when paying Equity Value for a target say 1000, is there a fair estimate of the proportion of cash to acquire in the target in order to avoid overpaying? Say if the target is bought for 1000 and it has 200 cash, we are effectively paying 800.
I am looking for a way to say this is a good investment looking at the proportion of this cash to equity value.
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Sometimes you come up with a working capital peg during an acquisition and the cash on hand is addressed with that. Google "working capital peg" and that will tell you in detail how it's usually handled.
Question 1. Can a company be a target if it has a lot of cash at hand? Question 2 is it a good idea to use up all the cash after acquiring a company?
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