Buyout of private companies - which Shareholder's Equity components?
Hello. Getting ready for interviews at PE firms and it ocurred to me that, for a public company, it's easy to calculate the buyout of equity portion of the Uses of Funds (#shares vs. offer price), which will typically represent a premium over the current market cap of the company.
If it's a private company, however, we compare the offer value vs. which components of the Shareholder's Equity? We've got (at least): common equity, retained earnings, APIC, treasury stock, accumulated other comprehensive income.
In other words, if I were to buy a company with 0% premium over book value of equity, which line items of the shareholder's equity section of the B/S are considered? Is it simply all of them?
Being as clear a possible: suppose a shareholder's equity section of 100 common stock, 100 preferred stock, 100 retained earnings, 100 APIC and -150 treasury stock. I approach the company and the seller agrees to sell 100% of the company with 0% premium. How much do I pay for the buyout of equity?
Thank you very much.
Components of Shareholder's Equity to consider in a buyout (Originally Posted: 02/13/2017)
Hello. Question I got in an interview with a Top 3 WW PE fund. It was the 1st question of the interview, just to get things started.
Suppose a shareholder's equity section of 100 common stock, 100 preferred stock, 100 retained earnings, 100 APIC and -150 treasury stock. I approach the company and the seller agrees to sell 100% of the company with 0% premium. How much do I pay for the buyout of equity?
Could you guys please help me on that?
Thank you.
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