Hello everyone,
I have a question about purchase premium and goodwill creation for minority investment deals.
We both know that in a LBO deal, equity value is usually much larger than Shareholders' Equity in Balance Sheet. Then we have to do the balance sheet adjustment: allocate the purchase premium and calculate goodwill creation.
My question is, how do you handle these purchase premium and goodwill creation in a minority investment / Growth Capital model?
My previous thought is that minority investment / Growth Capital model is pretty straightforward: work out 3-statemnt forcast and infuse the new capital into paid-in capital / additional paid-in capital parts. However, what if equtiy valuation of the deal is larger than Shareholders' Equity in Balance Sheet? Are we supposed to do Sources & Uses table, Purchase Premium Allocation table and Balance Sheet Adjustment table? Or we just treat it in a simpler way?
Thanks
Minority deals without a change of control (+50%) does not require PPA as there isn't a change in ownership rather than a minority financing event. There may be some dilution that occurs not dollar for dollar..
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