How would you classify this deal and what kind of template would you use?
I am working on a model for a small firm that is looking to purchase a majority share of a division of a publicly traded company. The problem is, I'm not sure how to structure it--it it an asset sale? LBO?
To clarify, let's say that PE Capital is looking to buy the Widget division of Newco. Newco is a publicly traded company. PE Capital would like to buy 81% of the Widget division through a combination of equity and 3-4 tranches of debt (senior, junior, etc.). What kind of template should I use?
How would you structure this deal? What are the various sheets I need for this model? I'm very new to all of this. Any comprehensive, overview/walkthrough help would be much appreciated. Please feel free to ask questions, as I probably did not provide all of the necessary information.
Thanks a ton.
LBO check the templates provided with the Pearl & Rosenbaum book.
I took a look at the template--it still leaves me with the problem of what the put in for share price. Since this is just a portion of a publicly traded company, I don't have share price information.
If you have the division's EBITDA you can assume some multiple and get to a TEV, and then imply a transaction value for, let's say, 81% of the division
This guide @ macabacus may be helpful and the most direct way to effect in terms of mechanics
http://macabacus.com/strategies/leveraged-partnership
As modeling shorthand, you should 1. make a purchase price assumption for WidgetDiv (TEV via multiples) 2. figure out appropriate leverage (e.g. 4 x PF EBITDA) 3. Assume or determine net debt of NewCo contributed entity (net debt neutral assumption common) 4. Payment of cash via sponsor equity (invested in WidgetDiv) and pro forma leverage (from step 2) to NewCo to acquire 81% of WidgetDiv
It's an LBO.
^anonymous analyst is on the right track.
You probably have information regarding the revenue of the different divisions of this company. I would assume that the % contribution to revenue = the % contribution to EBITDA. That probably won't be 100% accurate, but it is a good start. Then apply a multiple. You may have to adjust your industry comp set to determine an appropriate multiple as you now only have one division of the company.
why do you want the share price, just get the EV. look into sec forms of the parent company.
I don't necessarily need a share price, just want something to plug into the template, as all of the templates I've seen have a box for share price that is used throughout the model.
If you're going to be this pedantic about how to use a model... finance may not be for you. taking monkey to a new extreme.
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