Probably a silly question, but what is the functionality of a stub period in an lbo model? I understand what it is, but not how it should (should it) actually link with the rest of the model...?
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what i would do is make a little switch to turn on and off the stub period. have your full year items, and then turn on and off the stub.
you just multiply the full year figures by your stub period, and as long as you are consistent throughout (many times forget to multiply things like depreciation by the stub period) it will balance.
Got it. What i'm wondering is why this is important to the rest of the model. Is it just the fact that the bs at the end of the stub period is the bs u need to adjust to get to your pro forma?
that's right.
the time frame has to be consistent. you can't use a FY bs for the pro forma if you made the acquisition in june.
like you said, need to adjust the model because you'll need it for the pro forma bs.
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